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COPYRIGHT DEPOSIT. 



STATE INSURANCE 



STATE INSURANCE 

A SOCIAL AND INDUSTRIAL NEED 



BY 

FRANK W. LEWIS 

n 




BOSTON AND NEW YORK 
HOUGHTON MIFFLIN COMPANY 

1909 



• of CONGRESS 
Two Cocies Received 

lib 21 1909 

j^ Ccpyrient Entry 
CLASS ^, XXc. NO, 

copy a; w 






COPYRIGHT, 1909, BY FRANK W. LEWIS 
ALL RIGHTS RESERVED 



Published March iqoq 



WITH FRATERNAL INTEREST THIS BOOK IS 

RESPECTFULLY DEDICATED TO 

THE WAGE-EARNER 



"It happens, as though through some inad- 
vertence, that in making a contract of the great- 
est possible moment, both parties seem to ignore 
absolutely certain very important elements. The 
contract is made as though sickness, accidents, 
invalidity and old age had been permanently 
banished from the earth. The daily wage is 
sufficient only for daily necessities; a man 
entitled to support for a lifetime unwittingly 
consents to a wage based upon a portion of that 
lifetime; for the competition in the field of labor 
is among the strong, the able-bodied, the effi- 
cient; the sick, the maimed, the superannuated 
are necessarily excluded" (p. 7). 



PREFACE 

This volume finds its justification in the keen 
interest which, from various causes, has been 
aroused in the subject of personal insurance. 

If it shall tend to stimulate interest and dis- 
cussion concerning a question of so profound 
and urgent importance its main purpose will 
have been accomplished. 

The author is under obligation to Dr. 
George Zacher, of the Imperial Insurance 
Office, Berlin, for permission to use the tables 
shown in Appendix E. While the data given 
are brought down only to the year 1904, they 
constitute the most convenient conspectus 
which has yet appeared. 

Boston, November, 1908. 



CONTENTS 

I. The Problem 1 

II. The Functions of a State 25 

III. State Insurance 42 

IV. Workmen's Insurance in Germany ... 60 

V. Accident Insurance and Workmen's Com- 
pensation 78 

VI. Existing Institutions Ill 

VII. Incidence 135 

VIII. Old-Age Pensions 148 

IX. Conclusion 171 

Appendices 179 

A. Section of Prussian Railroad Law. 

B. Sections of Georgia Laws. 

C. Sections of Massachusetts Laws. 

D. British Workmen's Compensation Act 
of 1906. 

E. Workmen's Sickness, Accident, and 
Invalid Insurance in Germany and 
Other Continental Countries. 

Index 231 



STATE INSUKANCE 



THE PROBLEM 

It is the purpose of this volume to point out 
what seem to be certain faults in present 
social and industrial conditions, and to sug- 
gest how these faults might be corrected in 
some measure by a system of compulsory 
state insurance. It is believed that the policy 
indicated might result in mitigating poverty, 
in allaying social unrest, and in contributing 
to a higher degree of industrial peace. 

During the past century great labor-saving 
inventions, the application of steam and elec- 
tricity to machinery, resulting in the so-called 
factory system, have completely transformed 
the industrial world. Laws, customs, and 
methods adapted to the old order of things 
have frequently proved entirely unsuited to 
the new. But the immense progress made in 
the arts and sciences has found no counter- 
part in the laws and customs which that pro- 
gress demanded. We often discard the ma- 
chine that is five or ten years old for something 



2 STATE INSURANCE 

better, but we are content to live under laws 
and practices which have remained almost 
unchanged for three hundred years and which 
have little to commend them except their anti- 
quity. In the world of mechanics, of manu- 
factures, of physical science, and of commerce, 
the inventive mind is constantly on the alert 
to discover better, simpler, more economical 
or more effective methods, while the legislator 
boasts of treading in antiquas vias, as if it 
were a virtue and as if there were no unex- 
plored regions in the field of social or political 
science, no discoveries to be made, no reforms 
to be achieved. 

There is a principle underlying this discus- 
sion which is briefly comprehended in the 
maxim that every man is entitled to a living, 
or, stated in other words, that he is entitled to 
a living wage for his labor. This right has 
been called a natural, a political, an ethical 
right. For our purposes it is immaterial what 
name is given to it ; it is sufficient that we re- 
cognize it universally, not only in theory but in 
practice. If a man's life is sacred, if he is not 
to be stricken down by the assassin, so his 
right to a living shall be guarded — he shall 
not be allowed to starve. The right to life and 
the right to a living are not to be distinguished. 
"He that taketh away his neighbor's living 
slayeth him; and he that defraudeth the 



THE PROBLEM 3 

laborer of his hire is a bloodshedder." * This 
may be applicable not merely to an individual, 
but to a condition of society or to a defective 
industrial system. This right has been as- 
serted frequently and emphatically by the 
highest authorities. According to Cardinal 
Manning, it is a doctrine of the Catholic 
Church that the right of man to subsistence 
is prior to the rights of property. Leo XIII 
declared that it was "a dictate of nature more 
imperious and ancient than any bargain be- 
tween man and man that remuneration must 
be enough to support the wage-earner in rea- 
sonable and frugal comfort," 2 and Montes- 
quieu maintained that the state owes to all 
of its citizens an assured subsistence and a 
mode of life consistent with health. 3 To Car- 
lyle it seemed a platitude of a world in which 
all working horses could be well fed and in- 
numerable working men should die starved. 4 
Malthus, on the other hand, foresaw for the 
near future the superfluous man for whom no 
cover should be laid at nature's mighty feast, 
whom she should tell to begone. 

If all comers, whether by immigration or by 

1 Ecclesiasticus, xxxiv, 12. 

2 Rerum Novarum. Allocutiones, vol. iv, p. 200. Official trans- 
lation. 

3 Esprit de Lois, liv. 23, ch. 29. "L'Etat, qui doit a tous les 
citoyens une subsistance assuree, la nourriture, un vetement conve- 
nable, et un genre de vie qui ne soit point contraire a la sante." 

* Past and Present. 



4 STATE INSURANCE 

birth, are not to be welcomed by the state, the 
only remedy is by efficient restriction ; the in- 
dividual should be denied the right to come as 
an immigrant, even the right to be born. But 
theories and abstractions aside, every civilized 
nation acts upon the principle stated; it does 
not propose that any person within its limits 
shall perish for lack of food, clothing, or shel- 
ter. Therefore, without analyzing its action, it 
decides in substance that the product of labor 
of a given generation must support all during 
that generation. 1 

But while the industries of a community 
ought to support the great body of workmen, 
it is true that specifically any given industry 
ought to support those workmen who devote 
themselves to it. This consideration is highly 
important, for while the natural wage-earning 
period of a man may be placed at about fifty 
years, there are industries so detrimental to 
health or so dangerous to life that they may 
exhaust the capacity for work in twenty years, 
or even less. 

In considering the industrial life we must 
weigh the waste as well as the utilized, the 
productive portion. If the wage earned during 
life is insufficient to cover the waste, it is not a 
living wage. If a given industry does not pay 
the necessary living wage, it is not a self-sup- 

1 F. A. Walker, The Wages Question, p. 34. 



THE PROBLEM 5 

porting industry; it is, in some measure, 
parasitic. 

The elements of cost and waste have been 
studied with somewhat definite results. There 
is the rearing of children to the age of self- 
support, with the fact that about thirteen per 
cent die during that period ; the loss from the 
death of wage-earners during the fifty years 
of the assumed productive life, estimated at 
a loss of twenty-five per cent in the United 
States ; * six per cent lost through illness, 
nearly an average of nine hundred days in 
fifty years ; 2 the cost, in money and time, of 
accidents ; the support of the aged, — all in- 
escapable elements. 

If all employers were a unit, and if this unit 
were intelligent and sagacious, however merci- 
less it might be ; if it were confronted with the 
problem of procuring labor merely upon hard 
business principles, keeping in mind both cost 
and efficiency, seeking the lowest cost con- 
sistent with high efficiency, it would consider 
how much it would cost to rear the human 
being or the class of human beings best fitted 
for its purpose ; how long a period of infancy 
must precede his capacity to work and what 
loss from death would occur during that pe- 
riod ; how long the natural term of labor may 

1 F. A. Walker, Wages, p. 35. 

2 C. S. Loch, Insurance and Savings, p. 50. 



6 STATE INSURANCE 

be and how much diminished by premature 
death ; what allowance must be made for inca- 
pacity resulting from accidents, from sickness, 
from invalidity of any sort ; how long a period 
of dependence there would be after working 
days were over. It would find that, for the 
best results, this working man and his family 
must be well clothed, well housed, well fed, 
and that he must live and work under proper 
hygienic conditions; that he must have hos- 
pital, medical and surgical attention in illness 
and after accidents ; it would even find that, 
to a certain extent, he must be educated and 
have mental and moral training. Having 
determined this cost, it would pay that and 
nothing more. In other words, it would act 
as intelligently, not to say humanely, in rear- 
ing a workman destined for efficient labor as 
it now does in rearing a beast of burden. 

On the other hand, labor, acting with simi- 
lar intelligence and singleness of purpose, and 
making similar allowances for waste, could 
demand nothing less than the cost of living 
for the whole period of life and covering all its 
vicissitudes, and would of course make the 
scale of living as high as possible. It might 
have in addition certain theories as to its right 
to a certain proportion of the produce of labor 
and be very keen as to any injustice in the dis- 
tribution of profits. 



THE PROBLEM 7 

But practically it happens, as though 
through some inadvertence, that in making a 
contract of the greatest possible moment, both 
parties seem to ignore absolutely certain very 
important elements; the contract is made as 
though sickness, accidents, invalidity, and old 
age had been permanently banished from the 
earth. The daily wage is sufficient only for 
daily necessities; a man entitled to support 
for a lifetime unwittingly consents to a wage 
based upon a portion of that lifetime ; for the 
competition in the field of labor is among the 
strong, the able-bodied, the efficient ; the sick, 
the maimed, the superannuated are necessar- 
ily excluded. 

The disparity between the wage paid during 
the period of earning capacity and a wage suf- 
ficient for the workman's support through- 
out his life is most striking in dangerous and 
unhealthy employments. If the industry, pay- 
ing what is a living wage for the moment 
merely, exhausts its victim in twenty years or 
less, as is frequently the case, it has drunk the 
wine of the wage-earner's life and left to him, 
or to society, the dregs. It has often waste- 
fully used up this human material and thrown 
the wreck aside as remorselessly as though it 
were inanimate machinery. The injustice of 
this state of things is frequently emphasized 
by the fact that those very industries have 



8 STATE INSURANCE 

yielded large profits to their promoters. It 
betrays a singular apathy on the part of the 
public that a usage so abhorrent to every in- 
stinct of justice, so shocking even from the 
standpoint of social expediency, should go on 
practically unchallenged for generations. 

The subject has usually been discussed as 
though it concerned individuals or classes, the 
employer and the workman, to be governed 
by the maxim laissez faire, involving merely 
the question of supply and demand or matter 
of private contract, over which the state ought 
to have no control. This might be a safe policy 
if the parties to the labor contract met on 
equal terms; but we cannot ignore the fact 
that there is no industrial equality between 
them necessarily. In communities where pop- 
ulation is congested or those where immigra- 
tion is easy and unrestricted, — not to say 
promoted for the very purpose of keeping 
down wages and making the laboring classes 
more humble and subservient, 1 — the rate of 
wages is such as to bring the scale of living 
very near to what is vaguely termed the line of 
subsistence. Rather than a fixed relation be- 
tween supply and demand, we frequently find 
what might be termed a constant demand and 
a supply varying at the will of those who fix 
wages ; the workman brings his wares to an 

1 J. G. Brooks, Social Unrest, p. 20. 



THE PROBLEM 9 

overstocked market and must take the atti- 
tude of a suppliant. The situation is often 
aggravated by the immobility of labor. While 
mobility is highly essential to the well-being 
of labor, through local attachment, through 
ignorance of other localities and labor condi- 
tions, through that degree of poverty which 
makes transportation impossible, through 
mere inertia resulting from the debasement of 
poverty, the laboring man does not migrate; 
he does not even pass from one stratum of 
labor to another in his own locality. 1 We do 
not need to claim universal application for 
the "iron law" of Lassalle or the theories of 
other economists upon this point ; they seem to 
apply to some localities and some conditions. 
Whatever the cause or explanation, there are 
large classes of laborers in this country who 
do not receive a living wage according to the 
standard suggested, — a wage sufficient for 
support for the entire life. 

Investigations have frequently been made 
to determine the basis of wages, judged by 
their sufficiency for the maintenance of health, 
vigor, and physical efficiency. No lower 
standard could be justified under any circum- 
stances, although, as a matter of fact, a lower 
standard does obtain often over wide areas 
and for long periods of time. 

1 F. A. Walker, Wages, ch. xi. 



10 STATE INSURANCE 

We are apt to think of the laboring classes 
in this country as well fed, well clothed, and 
well housed, and not proper objects of solici- 
tude. We are incredulous when told that 
Germany's poorer classes, though less fav- 
ored by circumstances, maintain a higher 
level of well-being and a far higher level of 
vitality than those of either the United States 
or England; 1 or that we know less about the 
poverty of our people than almost any other 
nation of the Western world ; 2 or that Ameri- 
cans work themselves out at an earlier age and 
are more subject to fluctuations of employ- 
ment than European workmen, and indus- 
trial accidents are much more frequent. 3 

As a basis of comparison, we might take 
$600 per annum as a minimum wage, based 
upon a family of five or six, in industries out- 
side of agriculture. Upon a figure somewhere 
near this, there has been, in a very general 
way, some unanimity of opinion among ex- 
pert observers. 4 While the minimum wage 
permissible varies much with local and other 
conditions, it is obvious that under given cir- 
cumstances it must be quite inelastic in the 
sense that it cannot be materially diminished 

1 A. Shadwell, Industrial Efficiency, ii, 453. 

2 Robert Hunter, Poverty, p. 12. 

3 T. S. Adams and H. L. Sumner, Labor Problems, p. 159. 

4 J. A. Ryan, A Living Wage, p. 150; E. T. Devine, Principles 
of Relief, p. 35; Hunter, op. cit. p. 51, and authorities there cited. 



THE PROBLEM 11 

without consequent suffering. It is instruct- 
ive to compare this minimum wage with 
actual wages. In Massachusetts during a 
period of great industrial prosperity, — with 
the necessary attendant cost of living, — 
out of over 300,000 adult workmen only 
about two fifths received as much as twelve 
dollars per week ; this, with proper allowance 
for a considerable percentage of unemploy- 
ment, would make considerably less than 
$600 per year. 1 But this would be exceptional 
as to time and locality. It has been said that 
the 18,000,000 wage-earners of the United 
States receive an average wage of only $400 
per annum; 2 that the mass of unskilled work- 
men in the Northern States receive less than 
$460 and in the Southern States less than $300; 
that even this lower figure may be reduced by 
unemployment to $225 to $250 per year ; 3 and 
this for large classes of workmen and for con- 
siderable periods of time. 

These figures would seem to show the gross 
inadequacy of wages even if the vicissitudes of 
life are entirely disregarded, — as they are 
and must be by the great majority of laborers, 

1 Compare Mass. Labor Bulletin, No. 44> December, 1906, p. 430, 
with Thirty-seventh An. Report, 1906, Mass. Bureau of Statistics of 
Labor, pp. 279-281. 

2 Address before American Association for Advancement of Science, 
December 27, 1906, by Henry Laurens Call. 

3 Hunter, op. cit. pp. 53-56; Adams and Sumner, op. cit. pp. 160- 
166. 



12 STATE INSURANCE 

— and to demonstrate the futility of all at- 
tempts at saving even with the highest degree 
of thrift. There are myriads of wage-earners 
whom only the narrowest margin separates 
from bitter want. It has been said that in 
Europe in most cases a serious accident to a 
workman means an immediate demand for 
charitable assistance ;* and that in some local- 
ities in England a snowfall is a serious calam- 
ity, as no provision has been made for the 
resulting day of idleness. 2 There could un- 
doubtedly be found in many a manufacturing 
town, both in England and America, families 
who have not once caught a glimpse of pro- 
sperity in four generations, nor once been sep- 
arated from actual want by an interval of 
thirty days. "For commonplace and average 
abilities, in mill and factory, the cheering pro- 
mise of getting free from an 'existence wage* 
scarcely exists." 3 

For such workmen poverty is not mere 
destitution ; there goes with it apprehension as 
to the future — apprehension lest work shall 
cease ; lest sickness or accident may befall for 
which surgical or medical aid shall be lacking ; 
lest death may come leaving wife and children 
destitute. For such there are days of unremit- 
ting toil and nights of physical weariness in- 

1 W. F. Willoughby, WorkingmerCs Insurance, p. 11. 

2 Blackley, Thrift and Independence, p. 11. 

3 J. G. Brooks, Social Unrest, p. 92. 



THE PROBLEM 13 

vaded by ceaseless anxiety. There goes with 
poverty, too, the consciousness of the loss of 
dignity and manhood; the knowledge that 
there is left no capacity to make the contract 
for labor except on unequal terms. They 
must accept whatever conditions may be im- 
posed, if not in a spirit of resignation, with the 
mute passiveness of the beast of burden, trans- 
formed not by the siren of hope but by 
despair. 

There is a feeling, too general, that poverty 
and pauperism are the results mainly of in- 
temperance and improvidence, and we some- 
times think that we see in them a sort of 
retributive justice. Statistics both in England 
and America would seem to indicate that only 
a small part of existing pauperism is traceable 
to intemperance, — only about one seventh, 
— while about three quarters — seventy-two 
per cent — is attributable to misfortune. 1 As 
to improvidence, it is undoubtedly, to some 
extent, both the cause and consequence of 
poverty, but obviously there must be some- 
where in the scale of poverty and of earnings 
a condition where saving or provision for the 
future is impossible ; the present need may be 
so constant and so imperative as to preclude 
all thought of the future. Budgets have some- 

1 Charles Booth, in London Statistical Society, liv, 610; A. G. 
Warner, American Charities, p. 46, and Table VIII. 



14 STATE INSURANCE 

times been published showing the expendi- 
tures of laboring men, 1 Even when they con- 
cern the wages of the comparatively well-to- 
do wage-earners, they furnish eloquent and 
pathetic refutation of the theory that thrift 
would cure all of the ills of workmen. 

The figures and estimates referred to tend 
to show the inadequacy of wages, tested by 
the period of health and capacity ; but it would 
be sufficient for the purposes of this discussion 
to show that the lifetime wage is not adequate 
for the whole life, or even, whatever the view 
of the sufficiency of the wage, that out of it no 
provision can be made for the future if indi- 
vidual effort is the sole reliance. It would 
seem reasonable to expect certain indirect 
consequences of a defective wage system, or 
inadequate wages long continued, in a lack of 
thrift resulting from a sense of helplessness, 
gradual loss of efficiency, diminished self- 
respect, lower standards of responsibility to 
society, in a word, deterioration in manhood. 

Without going into the matter in detail, it is 
material to note the extent of poverty among 
workmen in its various forms. It is not pos- 
sible to give definite figures, nor is it necessary 
for our purpose; but the investigations of 

1 Mass. Bureau of Labor Statistics, Sixth An. Report, 1875, pp. 
221-354; B. S. Rountree, Poverty, a Study of Town Life (York, 
Eng.), ch. viii; Mrs. L. B. More, Wage-Earners' Budgets (New York 
City); U. S. Depart, of Labor, 18th Report, 1903, pp. 264-285. 



THE PROBLEM 15 

many competent observers do not lead to 
radically different conclusions. It is said that 
more than one half of the families of the coun- 
try, and nine tenths of those in the cities and 
industrial communities, are proper tyless ; that 
in a group of States including Massachusetts 
one fifth are in poverty ; * that one twentieth 
are paupers; 2 that one eighth of the families 
hold seven eighths and one per cent over one 
half of the property of the country ; 3 and that 
seventy-one per cent of the people hold but 
five per cent of the wealth ; 4 that one eighth of 
the families receive over one half of the total 
income, and that two fifths of the better-paid 
laborers receive more than the remaining 
three fifths. 5 These figures seem especially 
important when we are assured on high 
authority that "the tendency of purely eco- 
nomic forces is to widen the differences exist- 
ing in industrial society," 6 and that, "unequal 
as is the distribution of wealth already, the 
tendency of industrial progress — on the sup- 
position that the present separation between 
industrial classes is maintained — is toward a 
greater inequality still." 7 

1 Hunter, op. cit. pp. 43, 60. 
a R. T. Ely in North American Review, clii, 398. 
9 C. B. Spahr, Present Distribution of Wealth in the U. S. p. 69. 
* G. K. Holmes in Political Science Quarterly, viii, 593 ; R. T. Ely, 
Society and Social Relief, pp. 272-275. 
5 Spahr, op. cit. pp. 128, 129. 6 Walker, op. cit p. 166. 

' J. E. Caimes, Political Economy (Harper, 1874), p. 285. 



16 STATE INSURANCE 

Too frequently the dazzling splendor of 
great wealth blinds our eyes to the real signi- 
ficance of the signs of the times, and we think 
we see evidences of great national prosperity 
in those very phenomena which really indicate 
social injustice — a condition where the man 
who toils is invited to bask in the reflected 
warmth and light of another's prosperity. We 
are easily misled, too, by figures which are 
offered to demonstrate especially the well- 
being of the laboring classes, as those show- 
ing savings-bank deposits. In Massachusetts 
there would seem to be an average deposit of 
about $300. Even this amount would consti- 
tute a very meagre provision for the vicissi- 
tudes of the future. But investigations have 
shown that, while far the largest number of 
depositors belonged to the wage-earning class, 
they had relatively a small share of the depos- 
its; that the deposits of thirteen fourteenths 
of the whole number were but slightly larger 
than those of the remaining fourteenth; that 
in a typical bank the average deposits of 
wage-earners was less than $75. ' It does not 
go far towards indicating the prosperity of the 
laboring classes to show that the more thrifty 
or the more fortunate of them have accumu- 
lated a fund which thirty days of illness or en- 

1 Mass. Bureau of Labor Statistics, Third Annual Report, pp. 
30i, 313, 318, and 325; also Fourth Annual Report., p. 192. 



THE PROBLEM 17 

forced idleness might consume. As a matter 
of fact, deposits in savings banks seem to be 
made up, first, of the investments of well-to-do 
people, making a very large part of the aggre- 
gate; certain funds in transit, awaiting other 
investment or accumulating for a specific 
purpose; and, to a relatively small extent, of 
the slow savings of those wage-earners who 
are more thrifty, more fortunate, less bur- 
dened, or better paid than their fellows. 

But the matter cannot be treated merely 
from the standpoint of the individual. Whether 
one of its members shall become dependent or 
not deeply concerns society; pauperism and 
the various degrees of poverty affect the body 
politic. Even if we look upon them as forms 
of retribution for improvidence, intemperance, 
and vice, we cannot forget that the victim 
does not bear his burden alone. The state 
must provide the reserve which is lacking. 
Moreover, pauperism is something more than 
a burden imposed ; it is social disease, radical, 
contagious, and hereditary. Its ranks are con- 
tinually supplied from above, and every acces- 
sion suggests a possible horde of Ishmaels or 
Jukes. There are the propertyless, living in 
some degree of comfort, but barely making 
each month's earnings supply the month's 
necessities; the victims of poverty, who con- 
stantly feel the bitterness and sting of want; 



18 STATE INSURANCE 

the paupers clinging like parasites to society. 
The transition downward is easy; the pro- 
pertyless are on the verge of poverty and those 
in poverty on the verge of pauperism. The 
situation is so precarious that a slight misfor- 
tune — enforced idleness, a serious accident, 
illness or the death of the wage-earner — may 
start the unwilling victim on the downward 
course. But from the lowest stage, pauperism, 
there seems to be no return. The pauper is the 
victim of poverty who surrenders, and when 
he surrenders the capitulation is abject, ab- 
solute, and unconditional; having acquired 
the hated badge, he is content to wear it for 
life and to bequeath it to his children. The 
disease of pauperism has been aggravated 
through mischievous theories and practices, 
often by the very remedies which were pre- 
scribed for its cure. The gamut of experi- 
ments in dealing with the evil has been run. 
The pauper has at one time been the peculiar 
object of Christian solicitude, and those able 
to contribute to his relief have been threat- 
ened with the displeasure of the Church for 
refusing; at another stage he has been 
branded, delivered over to slavery, even put to 
death, under English law. For three hundred 
years, since the Poor-Law of Elizabeth, Eng- 
lish-speaking people have adhered to methods 
which were admitted to be unscientific and 



THE PROBLEM 19 

inefficient. The opinion was expressed after a 
trial of two hundred years that, if the poor- 
laws had never existed in Great Britain, the 
aggregate of happiness among the common 
people would have been much greater, and 
that they had very decidedly lowered the 
wages of the laboring classes and made their 
condition essentially worse. 1 And as to the 
conditions which tend toward pauperism it 
has been said that "the extremes of wealth 
and poverty were less widely separated six 
centuries ago. . . . The grinding, hopeless 
poverty under which existence may just be 
continued, but when nothing is won beyond 
bare existence, did not, I am convinced, char- 
acterize or even belong to mediaeval life." 2 
But however well satisfied we may be with the 
management of the problem of pauperism, 
the burden has been very great at all times. In 
mediaeval times one third of the tithes was 
deemed necessary for the support of the poor. 
During eras of great industrial depression in 
England the fear has arisen that the expense 
might consume all of the revenues of the king- 
dom. Even to-day the burden in England and 
America is a heavy one and perhaps not ma- 
terially diminishing. At least the cost would 
seem to be increasing. The cost in Great 

1 Malthus (Murray, 1817), ii, 338, 369. 

2 J. E. T. Rogers, Six Centuries of Work and Wages, pp. 414, 415. 



20 STATE INSURANCE 

Britain in 1880 was about $40,000,000; " in 
1897 it was $60,000,000 ; 2 and in 1905 it was 
$82,000,000. 3 

As definite figures cannot be given for the 
United States. Estimates have been made, 
based upon a population of 60,000,000. 4 With 
a population of 80,000,000 it would not seem 
extravagant to place the cost to-day at up- 
wards of $100,000,000. But these figures 
represent only a fraction of the real direct 
cost of maintaining the poor and dependent. 
The multiform expenditures of private char- 
ity; the endowments of hospitals and homes 
for the poor, the infirm, the sick, the aged; 
funds dispensed through the agency of 
churches, salvation armies, and semi-bene- 
volent societies ; contributions made at street- 
corners of cities and in response to solicita- 
tions from door to door ; the promiscuous giv- 
ing everywhere without investigation, system, 
or record, — these probably constitute, in the 
aggregate, a larger item, perhaps many times 
larger, than that which is represented by poor- 
rates. 

We are wont to look upon such facts and 
figures either with complacency or a sense of 

1 Lord Carnarvon, in Nineteenth Century, viii, 385. 

2 Mulhall, 1898. 

3 Statesman's Year-Book, 1907. 

4 F. B. Sanborn, quoted in Bliss, Cyclopaedia of Social Reform, 
ed. of 1898, p. 981 ; R. T. Ely, North American Review, clii, 398. 



THE PROBLEM 21 

helplessness ; to conclude that they are largely 
the result of ever-recurring, inevitable, and 
remediless contentions between labor and 
capital, or that poverty and pauperism are 
hopelessly involved with the thriftlessness, 
improvidence, or vices of certain classes. We 
discern in the phenomena no defects in sys- 
tems of jurisprudence, no need of a readjust- 
ment of industrial relations or of a revision of 
our conceptions of social obligation. We think 
we have performed our civic and Christian 
duty fully in the payment of poor-rates and 
our response to the calls of charity. 
f But we must reach one of two conclusions, 
— either that a large class of wage-earners 
receive a wage that is not sufficient to enable 
them to make provision for the future, or that 
they fail to make such provision through lack 
of thrift and foresight. In one case, they suf- 
fer grave injustice; in the other, they wrong 
society by wasting the reserve which should be 
accumulated and, in the time of need, rely 
upon the prudent and thrifty. In the former 
case, it may be claimed that society recom- 
penses them through the various forms of 
relief ; this would be equivalent to saying that 
restoration is made to them in the dole of 
charity of that which has been taken from 
them by a sort of institutional robbery. But 
even if the fault is entirely that of the wage- 



22 STATE INSURANCE 

earner, the problem of finding some system 
wiser, more practical, and more scientific 
than the present would remain; we ought to 
look for some disposition of the burden less 
odious to the recipient, less onerous to soci- 
ety, even if our efforts result in compelling the 
thriftless wage-earner to provide for a rainy 
day. 

^ It is highly profitable to investigate and dis- 
cuss industrial conditions from the standpoint 
of justice to the workman ; to inquire whether 
he is receiving his rightful share of the product 
of the mill or factory, or whether he is forced 
by some economic law which he does not un- 
derstand to leave behind him something that 
is his by right of creation. 1 But the concern of 
society as such is to be emphasized. To its 
care has fallen a large portion of poverty and 
pauperism with their measureless sequelae. It 
has carried the burden without due apprecia- 
tion of its nature or its weight, but with never- 
ceasing protest. It should consider whether it 
may not be alleviated, perhaps in the near fu- 
ture removed. "If such preventive organiza- 
tions covered the whole field of industry, and 
if personal thrift were developed to the point 
at which laborers did their own saving instead 
of paying large sums to do their saving for 
them, the need for providing relief would 

1 J. B. Clark, Distribution of Wealth, p. 9. 



THE PROBLEM 23 

almost disappear." * Society has here a pro- 
blem of great importance. It must solve it with 
reference to all of its phases, social, eco- 
nomic, industrial, and ethical. 

We live in a progressive age. The initiation 
of social experiments and the triumphs of so- 
cial legislation are proclaimed to the whole 
world. If, through our apathy and inertia, we 
sin, we sin under the clearest light that has 
ever shone upon the paths of men. We may 
not assume, even plausibly, that our social and 
industrial problems are essentially different 
from those which to-day confront every civil- 
ized nation. These problems are virtually the 
same, whether under a democracy or under a 
monarchy. Everywhere poverty is squalid and 
debasing, and riches are sordid and debasing ; 
everywhere the relations of capital and labor 
are similar, and there is a similar social dis- 
quietude over real or fancied grievances; 
everywhere there is the same gulf between 
luxury and penury, the same resentment 
towards the arrogance and pretensions of 
privilege and power. 

Nor can we intelligently hope that, in some 
mysterious way, democracy will tend auto- 
matically to cure industrial evils or to solve 
industrial problems. Rather should we bear 
in mind that, from the industrial point of 

1 E. T. Devine, Principles of Relief, p. 334. 



24 STATE INSURANCE 

view, democracy has not yet been achieved. 
Men are frequently under the domination of 
industrial conditions which inexorably over- 
ride statutes, constitutions, and bills of rights. 
Unless the workman can negotiate on equal 
terms for his labor, — the only commodity 
which he ever has to offer in the world's 
markets, — unless there is contractual equal- 
ity, mere political equality may be a mockery 
and a delusion ; his political rights may even 
be surrendered as a part of the consideration 
in the contract for labor. But through sane 
social legislation, based upon principles of 
equity and equality, we may gradually ad- 
vance towards real democracy. When we once 
begin to see the reality we shall never again be 
satisfied with the phantasm. 



II 

THE FUNCTIONS OF A STATE 

It is not proposed here to enter upon any 
general discussion of the nature, sphere, or 
end of the state, but to consider briefly some 
of the functions of a state as bearing upon our 
subject; to consider whether the experiences 
— not to say experiments — of civilized na- 
tions, including our own, may not furnish us 
with some light and guidance. 

The boundaries of what may be termed so- 
cial legislation cannot be deemed as definite or 
as having any degree of permanency. The 
laws and institutions of the state challenge 
frequent scrutiny. Changing conditions of 
industry or of society, more enlightened con- 
ceptions of government, may call for radical 
changes in the attitude of the state towards 
the individual, and laws in which there has 
been general and long-continued acquiescence 
may be found inadequate or even founded 
originally upon theories which no longer seem 
tenable. 

The modern state, in its legislation, pursues 
its course somewhere between the extremes of 
individualism and socialism. The very con- 
ception of a state as organized society involves 



26 STATE INSURANCE 

the idea of law which shall restrain or compel, 
shall interfere with the freedom of the indi- 
vidual for ethical, economic, social, or other 
ends. No one would go to the extreme of 
individualism. We are all socialists, perhaps 
paternalists, although the term paternalism 
seems inapplicable in a democracy. The citi- 
zen says Vetat c'est moi; he does not abdicate 
or surrender, he merely delegates. He does 
not call upon the state as a child upon a father, 
but rather as a master upon a servant ; in his 
collective capacity, he commands it to do his 
will — to do that which it is inconvenient or 
impracticable for him to do in his individual 
capacity. The members of a community find 
that many desirable ends can be accom- 
plished only through collective agencies. The 
individual cannot educate his child, provide 
suitable avenues of communication, protect 
himself against impositions and frauds in food 
and drugs which endanger health or life, 
stamp out disease or protect himself against its 
contagion, or care for orphans or the insane, 
for dependents of many kinds. These illustra- 
tions point to social legislation in which there 
is substantially universal acquiescence in this 
country. We look upon the assumption of 
these functions as inseparable from a well- 
regulated state. Yet the stern individualist 
needs to be reminded that almost every step in 



THE FUNCTIONS OF A STATE 27 

this direction has met with the strenuous op- 
position of his class which has insisted that it 
was taken in violation of some sacred and in- 
fallible rule of action. But to conceive of a 
state divested of these and similar functions is 
to retrace our steps far back towards barbar- 
ism. 

** The state should move cautiously and ten- 
tatively in the direction of experiment ; but, as 
the evolution of the modern state plainly 
shows, it must move. It must often subor- 
dinate the independence of the individual to 
the general good ; it must work out many of its 
beneficent purposes by collective means; it 
must sometimes compel the individual to do 
that which he ought to be willing to do. 

% It would seem that adhesion to the existing 
order of things can be counted upon to pre- 
vent hasty and ill-considered legislation. In 
fact, there are no pages of history more heart- 
rending than those which tell the story of 
great industrial wrongs affecting myriads of 
men, women, and children in Great Britain 
and of the apathy and immobility of those, 
including statesmen, economists, and philan- 
thropists, to whom the situation ought to have 
appealed irresistibly. To the cry of children 
robbed of childhood and of women robbed of 
womanhood her great statesmen solemnly 
replied, laissez faire. The facts elicited and 



28 STATE INSURANCE 

proclaimed by Peel and others as early as 
1802 would have awakened the sympathy of 
savages. One would say that the ethical sense 
of the nation ought to have been stirred to 
thorough and instant action. Yet forty years 
afterwards, during which the subject had been 
kept constantly before the public mind 
through frequent parliamentary inquiries and 
through the efforts of a few individuals, — 
ostracized for their zeal and humanity, — it 
could be said conservatively that a state of 
things existed "which could scarcely be paral- 
leled by any of the barbarous practices which 
contributed to make negro slavery so abhor- 
rent." 1 But England, self-complacent, inert, 
mindful of the awful perils of paternalism, re- 
mained passive. Proposals to restrict the evils 
met with the most bitter class opposition ; a 
those pecuniarily interested "were convinced 
that national prosperity and their own profits 
must rise and fall together " ; 3 and the legis- 
lation suggested was denounced as an imper- 
tinence, as an unwarranted interference with 
the right of manufacturers to regulate their 
own affairs, as a menace to England's pro- 
sperity and her commercial supremacy. "It 
took twenty-five years of legislation to restrict 

1 Knight, History of England, viii, 395. 

2 Lecky, History of England in the Eighteenth Century, vi, 226. 

3 Hutchins and Harrison, History of Factory Legislation, p. 19. 



THE FUNCTIONS OF A STATE 29 

a child of nine to sixty-nine hours per week." * 
And "it took seventy-five years to ascertain 
that the factory acts, instead of weakening, 
had strengthened her in the world's rivalry." 2 

As another illustration, public education in 
Great Britain encountered the strenuous op- 
position of every individualist. As late as 1870 
she was pronounced behind every other na- 
tion of the world in this regard, centuries be- 
hind Prussia. " The idea prevailed that edu- 
cation conducted by the state would be some- 
thing un-English ; something which might do 
very well for Germans and Americans and 
other such people, but which was entirely un- 
suited to the manly independence of the true 
Briton." 3 These objections were not limited 
to the ignorant and thoughtless, but were ad- 
vanced by England's most eminent statesmen 
and had the cordial sympathy of the Queen. 

But we need not go so far for an instance, 
to which fuller allusion is made elsewhere, 
showing the painfully slow working of the 
public mind as evinced in legislation. About 
seventy years ago a doctrine was announced 
almost simultaneously by the courts of Eng- 

x Hutchins and Harrison, op. cit. p. 21. The State of Illinois 
limits children of sixteen to eight hours per day. 

a Traill, Social England, vi, 825; A. G. Warner, American Chari- 
ties, p. 18. 

s J. McCarthy, History of Our Own Times, iv, 289, 290; Lecky, 
History of England in the Eighteenth Century, vi, 276. 



30 STATE INSURANCE 

land and America concerning the right of 
workmen to recover damages from employers 
for a certain class of injuries suffered in the 
course of their employment. It was almost 
instantly recognized by thoughtful men that 
the doctrine would work flagrant injustice. 
The menace of these decisions was so grave 
that it would have been quite justifiable if 
every legislature where the doctrine was to 
become applicable had been instantly con- 
vened to counteract their effect by appropriate 
laws. The doctrine was so hopelessly wrong 
that it was said in the parliamentary discus- 
sions in England in 1893 and 1897 that there 
Was hardly a reputable lawyer in England 
who would defend it ; " not so much as a single 
employer rose in his place to give it a decent 
burial"; "there is no one so poor as to do it 
reverence." ' During that long interval there 
have been almost daily illustrations in the in- 
dustrial world of the great injustice of the 
law; there have been legislative and parlia- 
mentary committees and commissions with- 
out number, accumulating a mass of facts all 
tending in one direction; there have been 
opinions of economists, philanthropists, and 
statesmen of almost unanimous import; the 
doctrine has been abrogated wherever it had 
gained a foothold and is no longer in force in 

1 Asquith, Hansard (1897), xlviii, 752. 



THE FUNCTIONS OF A STATE 31 

any civilized land outside of the United States. 
Yet we find here solemn and protracted hear- 
ings before legislative committees to consider 
the question as though it had not been au- 
thoritatively settled for all except the extreme 
laggards in the march of human progress. 
^ These illustrations are adduced for the 
purpose of suggesting that there is far greater 
danger of a tardy recognition of the necessity 
for action on the part of the state than of its 
rashly assuming functions of a questionable 
nature. Looking retrospectively at many social 
reforms which have engaged public attention 
for decades and even generations, we should 
say they ought to have been accomplished 
in a single session of a legislature or parlia- 
ment and without any opposition from in- 
telligent men. Each generation, studying its 
predecessors, is amazed at the tardy appre- 
hension of what seem to be the most obvious 
truths. In the economic, as well as in the 
physical world, facts which seem to lie within 
the scope of ordinary observation are concealed 
for centuries and when announced fall upon 
incredulous and hostile minds. A call for 
advanced social legislation often strikes the 
public ear like the voice of a Copernicus or 
a Galileo. To such an extent do old theories 
and prepossessions dominate all of our con- 
ceptions. 



32 STATE INSURANCE 

Meantime the world's progress along the 
lines of wider governmental activity would 
seem to discredit the stock objections of the 
extreme individualist. His predictions and 
apprehensions for the last two hundred years 
seem ridiculous in the light of experience. It 
is noteworthy that while there has been a 
constantly growing tendency to broaden the 
functions of the state, there is seldom a dis- 
position to recede. The natural conservatism 
of men, the tenacity of conventional beliefs 
and traditions seem to give constant assur- 
ance that governments are not given to enter- 
ing upon visionary projects. 

One feature of the opposition to the legisla- 
tion proposed is worthy of notice. The fear is 
expressed that it would prove to be paternal- 
istic class legislation of a mischievous form. 
The apprehension seems to come largely from 
those who are already recipients of the benefits 
of paternalistic laws in their most odious form. 
" Our magnates of industry have not preached 
paternalism, but, in season and out of sea- 
son, they have practiced it. They have prac- 
ticed it so long and so openly, and with such 
conspicuous profit to themselves, that it is 
grotesque drollery for them to cry out against 
paternal legislation." l 

After the Great Pestilence in England the 

1 J. G. Brooks, (Socio/ Unrest, p. 46. 



THE FUNCTIONS OF A STATE 33 

Statute of Labourers was strenuously insisted 
upon because the demand for higher wages 
tended to "the damage of the great men," 1 
and to "the impoverishing of gentlemen." 
For centuries it remained, in some form, the 
law of the land, virtually reducing the labor- 
ing classes to abject servitude, although in 
distinct violation of a fundamental principle 
of political economy. It was demanded and 
retained by the same class who hysterically 
protested against the Factory Acts as an im- 
pertinent interference with the freedom of 
contract. Those who have fattened so long at 
the trough of privilege that they have come 
to believe that they have acquired vested 
rights as recipients of government favor obey 
a human, although not a noble, instinct in 
looking with jealousy and suspicion upon the 
approach of any who threaten to become new 
claimants. 

That may well be termed an odious form 
of paternalistic legislation under which the 
strong are exalted at the expense of the weak ; 
on the other hand, the state which protects 
the weak against the strong is fulfilling one 
of its most sacred and fundamental functions. 
Especially should a democracy, founded upon 
the theoretical assumption of equality, seek to 
make the theory an actuality. It was a maxim 

1 Statute, 1351. 



34 STATE INSURANCE 

of Frederick the Great that the first function 
of the state consists in holding the balance 
between the classes. 

We may liken the state to a host with all its 
inhabitants as guests, invited to share the 
common bounty of nature, ample for all. 
It would obviously be indecorous for the host 
to show favor on the occasion, to prefer one 
guest or one class over another; but it may 
reasonably anticipate that some of these guests 
will be aggressively gluttonous or rapacious, 
disposed, and, by their superior physical 
strength or mental cunning, able, not only to 
devour their own portion but to seize and 
pocket the share of a neighbor, perhaps on 
some claim of superior prudence or special 
capacity to act as trustee for the despoiled. 
However abhorrent the idea of policing the 
feast may seem, especially to those who have 
predatory instincts and purposes, the host 
may decide that that is an essential feature 
of his hospitality and that it would be un- 
seemly that some should go away with hunger 
satisfied and full pockets while others are 
hungry or starving. 

Society, then, must have regard for its 
weaker members and the progressive Christ- 
ian state must rest upon ethical foundations. 
To the individualist the very words ethical 
and social as applied to legislation seem 



THE FUNCTIONS OF A STATE 35 

odious; but dogmatic theories as to law and 
government should be reexamined wherever 
results constantly falsify and contradict the 
theory. All such theories must be tested with 
reference to industrial conditions as they 
arise. If existing laws and institutions tend to 
make the economically weak weaker and the 
strong stronger, or to increase the inequality 
between the weak and the strong, they are 
radically defective. If, as many profess to 
believe, in the industrial world of to-day the 
predatory instincts of men are fostered, and 
industrial robbery is not only made easy but 
widely practiced, the state must interfere. If 
such conditions exist, it is far more important 
that it should act effectively than that it should 
exhibit a blind reverence for traditions. There 
are as strong reasons, inherently, for legis- 
lating against any indirect robbery which is 
practiced as the result of economical disparity 
between the parties to a contract as for pro- 
hibiting highway robbery or larceny. Either 
class of laws may fairly be called socialistic 
or paternal. There would seem to be no good 
reason why it is not as much a proper function 
of the state, if it can do this effectively, to 
guarantee equality of opportunity, as to guar- 
antee political equality. 

^Vhe state may properly inquire into the 
causes of, and seek to allay, social unrest. It 



36 STATE INSURANCE 

may consider how far industrial conditions 
contribute to economic waste; whether some 
different mode of dealing with a social pro- 
blem may not be better than an existing 
method ; whether, for example, it is better to 
care for poverty and pauperism or to seek 
to prevent them, any solution of the problem 
being essentially socialistic. In dealing with 
questions that arise, it must have regard not 
merely for the superficially cheaper method, 
but must seek to find the one which is sound- 
est on economic principles and most consist- 
ent with justice and right. 

There is a feeling widely prevalent, though 
not often bluntly stated, that it is legitimate 
for the state to assume a paternal attitude 
toward certain worthy classes, to enable them 
in turn to take a similar attitude toward 
others. The practice of this theory has always 
wrought untold misery and wretchedness. It 
ignores the essential selfishness of men; the 
divine trusteeship degenerates into a gross 
betrayal of trust for which there is no remedy 
or punishment. 

It will be suggested that legislation such as 
is proposed, looking to state insurance, tends 
to weaken the stand which the community 
should take against socialism. Quite natur- 
ally a demonstration of the mischievous re- 
sults of individualism gives a broader and a 



THE FUNCTIONS OF A STATE 37 

keener conception of social responsibility and 
leads towards social reforms; but there is a 
wide interval between rational social reforms 
through legislation and socialism. The dis- 
content which arises from the working of un- 
just individualistic laws and institutions is 
undoubtedly allayed by removing just causes 
of complaint. A study of the experience of 
Germany for the past twenty-five years fur- 
nishes striking evidence of this fact. Those 
who would resist all attempts at reform in 
industrial conditions, lest they be deemed con- 
cessions in the nature of a surrender, would 
dam higher a rising stream to prevent its be- 
coming uncontrollable, blindly contributing 
to the disaster which must ensue. 
/ ^lt will also be said that social legislation 
which is to be commended in a foreign gov- 
ernment — in a monarchy — may be en- 
tirely unsuited to a democracy; that however 
successful their experiments in relieving in- 
dustrial conditions, their example furnishes 
no light for us. It might well be retorted that 
a republic should be the first to attempt to 
realize one of the highest ideals of real de- 
mocracy — the ideal of industrial equality. 
But the social and industrial problems which 
are to be solved by social legislation are the 
same under any form of government. " Social 
legislation is independent of the constitution 



38 STATE INSURANCE 

of states ; it is indispensable in monarchies as 
well as republics." * The adoption of the Aus- 
tralian ballot was delayed two years in a cer- 
tain Western State by the suggestion, on the 
part of a senator, that it was Asiatic! The 
experiences of monarchical governments under 
radical social legislation possibly point out 
a path that should be followed by us a forti- 
ori. The management of mines, railroads, and 
manufacturing establishments calls for the 
same scrutiny everywhere ; the questions aris- 
ing between employer and workmen, between 
labor and capital, are not political but eco- 
nomic, industrial, social. The problems of pov- 
erty and pauperism, the treatment of accidents, 
sickness, and invalidity, as related to industry, 
all suggest certain social responsibilities call- 
ing for the state's intervention and for social 
legislation. 

It must be remembered that the assump- 
tion of any function by the state, like that of 
compulsory public education, must be based 
upon different, perhaps higher, grounds than 
that of compassion for a class. The state does 
not give education to the poor and property- 
less ; it pays a portion of its obligation to them 
in that form, not only as a matter of justice 
to them, but for the common weal, even for 
its own salvation. 

1 Ludwig Lass, German Workmen's Insurance, pt. 1, p. 5. 



THE FUNCTIONS OF A STATE 39 

The proposition that the state should take 
upon itself the new function of the insurance, 
in some form, of its citizens should be met 
rationally ; we should be wise enough to study 
without prejudice the legislation of other 
governments and their experience under such 
legislation ; our vision should be clear enough 
to recognize human progress wherever a 
demonstration has been plainly and conclus- 
ively made ; we should distrust our own con- 
clusions when we find ourselves attributing 
indisputable indications of an advance in 
the well-being of the laboring classes to the 
superior advantages and opportunities which 
a monarchy enjoys. 

Traditions and conventions have their place 
and value; but they are too often the refuge 
of the indolent and the superficial; of those 
employing cant rather than argument; too 
often, fetishes, blindly worshiped. 
^^lt is unwise to attempt to set arbitrary limits 
to the functions of the state. Each proposi- 
tion for enlarging its sphere of action must be v 
met, not by invoking ancient maxims which 
deserve to be relegated to the junk-shop of 
economic cant, but by an appeal to history 
and to sound economic principles. We must 
be mindful of what has been accomplished in 
the past, throughout the world, by sane social 
legislation, and we may profitably study cer- 



40 STATE INSURANCE 

tain analogies. "Baconian legislation will 
always proceed by reasoning from the most 
proximate and analogous experience which is 
available." 1 The points of analogy between 
steps in legislation already taken and the un- 
dertaking of insurance by the state are mani- 
fest. Even in the field of insurance the state 
has shown a purpose to supervise and to con- 
trol. Much that is stable and permanent in 
life insurance to-day is traceable to the state's 
intervention by way of direction and of re- 
straint. The field was an attractive one for 
the exploitation of the many for the benefit 
of the few. A study of life insurance in its early 
days reveals the dangers which threatened if 
it were to remain unregulated. 

The state's attitude towards pauperism 
furnishes another instructive analogy. If the 
state may assume the parental relation towards 
the pauper, it may properly consider the 
causes which lead to pauperism ; it ought to be 
as legitimate a function of the state to seek to 
prevent it as to attempt to deal with it after it 
becomes a dangerous and incurable disease. 

But the rule of action must be the same in 
all legislation which concerns society as such, 
— the rights of property, the independence, 
the comfort, or the convenience of the indi- 
vidual must yield whenever a distinct public 

1 W. S. Jevons, State in Relation to Labor, p. 24. 



THE FUNCTIONS OF A STATE 41 

interest is subserved by an enlargement of 
the function of the state. The property of the 
citizen is held subject to the right of eminent 
domain; his acquiescence in that right con- 
stitutes a part of his allegiance to the supreme 
authority. The right of the state to condemn 
the property of the individual to public use 
is not essentially different from its right to 
compel vaccination or attendance upon public 
schools, or, if a case can be made out, to com- 
pel the insurance of those whose economic in- 
security not only indicates industrial injustice, 
but constitutes a constant menace to society. 



in 

STATE INSURANCE 

In the preceding chapter the general attitude 
of the state toward social legislation has been 
discussed briefly. We are to consider whether 
state insurance — the insurance, especially 
of workmen, against accidents, sickness, in- 
validity, and death — are within its proper 
and legitimate sphere. 

Some of the tests of the obligation of the 
state in this direction are simple : Would such 
insurance tend to mitigate industrial injust- 
ice? to distribute more justly and automat- 
ically, in a sense, the product of labor ? to 
contribute toward contentment among the 
industrially or economically weak by making 
more nearly equal industrial opportunity be- 
tween classes ? Would it tend to diminish pau- 
perism and extreme poverty ? Is it practicable 
or possible to accomplish fully the benefits 
of insurance by any individual effort? Does 
society need some such measure for its own 
well-being ? Is it preeminently a suitable and 
legitimate subject for collective action ? 

The suggestion of government insurance 
against the vicissitudes of life is not a new 
one; it has been agitated for the past fifty 



STATE INSURANCE 43 

years in Germany, England, and France. 
The imperfection and inadequacy of all exist- 
ing systems and plans has been recognized. 
It has become evident to thoughtful men that 
the matter should not be left entirely to private 
initiative and management. It has become 
the accepted doctrine that such insurance 
should be under the control of the state, as is 
shown by the appointment of legislative and 
parliamentary commissions and by the ample 
powers conferred upon state insurance de- 
partments. 

If, then, it is objected that state insurance 
Would be paternalistic and socialistic, it must 
be kept in mind that the paternal attitude 
toward insurance has already been taken by 
every civilized state in its assumption of su- 
pervision and control. And it may be fairly 
claimed that all insurance is in its very nature 
socialistic. Society, or a definite section or 
stratum of society, carries a burden in behalf 
of its members which the individual com- 
ponents cannot carry. The peril which men- 
aces the individual fills him with appre- 
hension as an individual, but he can look 
forward to meeting his share of the danger 
as a member of society with complacency. He 
does not seek to evade a burden but to read- 
just it. 

Before men thought of making provision 



44 STATE INSURANCE 

for such events by contract it was deemed a 
sacred obligation among them to provide for 
the victims of sudden calamities, of accident, 
sickness, or death, as a matter of humanity 
or Christian charity. Whether in the form 
of written law or otherwise, there has been 
this universal sense of social obligation. 

There is another feature of the matter 
which must be considered when we talk of the 
paternal aspect of government insurance. A 
large portion of the poverty and pauperism 
which prevails is traceable to the misfortunes 
which overtake workmen, for which they have 
made no provision. Precisely how large a 
percentage of the whole may be charged to 
these causes it is not material at this stage to 
discuss. A highly competent authority quoted 
elsewhere 1 would attribute at least a major 
portion of all poverty and pauperism to the 
misfortunes which overtake the poor rather 
than to fault. But can any kind of law be 
more distinctly and more odiously pater- 
nalistic than one which levies upon the pro- 
perty of A to support B as a pauper ? which 
violently takes from the prosperous to sup- 
port the destitute? from the thrifty for the 
thriftless ? from the temperate and provident 
for the intemperate and improvident? 

Now if a system can be devised under which 

1 See page 13. 



STATE INSURANCE 45 

the workman, as a rule, makes provision for 
all of the ordinary contingencies of the future, 
and whereby society is relieved of a large part 
of the burden of pauperism, we accomplish 
a certain end by a method quite dissimilar, 
while each method is distinctly paternal. It 
would hardly be contended that a law which 
compels one man to support another is to be 
preferred over one which compels a man to 
support himself. 

The incidence of charges under a system 
of government insurance will be treated of 
elsewhere, but if we assume, for the moment, 
that all such charges are to be borne by the 
state, it will be seen readily that there is not 
any additional burden carried — only a burden 1/ 
in another form, whether more or less odious 
or irksome. As it is now, without the finest 
discrimination, we pension one dependent and 
send another to the poorhouse; we give a 
badge of honor to the soldier who has served 
or suffered on his country's battlefields, but 
we brand with the stigma of disgrace the 
soldier of industry who has suffered in health 
or in limb in the industrial life of his 
generation. Through a system of state insur- 
ance it is proposed that present methods of 
dealing with a certain social problem be re- 
placed by something not more paternalistic 
but far more just; to readjust certain relations 



46 STATE INSURANCE 

between classes on more scientific and more 
ethical foundations. 

Whether, in the aggregate, the burdens 
now carried by society on account of its un- 
fortunate, helpless members would be dimin- 
ished under the scheme proposed must be a 
matter of speculation. It certainly would 
seem reasonable to hope that under a system- 
atic scheme of insurance against accidents, 
sickness, and invalidity there would be great 
economy compared with present methods, 
admitted to be wasteful and unscientific. It 
would not be optimistic to hope for the gradual 
eradication of pauperism and poverty under a 
method which leaves nothing to haphazard, but 
scientifically anticipates the future ; to look for 
a more hopeful feeling among the classes that 
find themselves hopelessly drifting towards 
poverty and dependence ; to look for a great 
increase of thrift when men themselves see 
that nothing is left to chance, but that they, 
under the encouragement of a definite plan, 
are themselves making provision for all the 
vicissitudes of the future; to look for a dis- 
tinct access in true manhood when the humblest 
and poorest workman realizes that he is re- 
ceiving a reserve of wages earned and not the 
odious dole of charity when vicissitudes come. 

It is a trite saying that the state cannot 
through legislation compel thrift; to which 



STATE INSURANCE 47 

should be added the statement that the state 
ought to encourage thrift and should put no 
obstacles in its way. It must be admitted by 
all who study the subject that the state does 
often unwittingly encourage thriftlessness, and 
nowhere more manifestly than by its poor- 
laws and their administration. 

A system which would tend to inspire hope 
rather than despair ; which would practically 
banish the almshouse from the vision of those 
who are on the brink of poverty ; which would 
guarantee that the hard-earned wages of the 
thrifty should not be levied upon to support 
the improvident; which would compel every 
industry to bear its own burdens ; which would 
demonstrate to some degree by infallible tests 
something as to the true share of labor in a 
given product; which would reveal in all its 
nakedness and hideousness that predatory 
feature of many industries which permits 
capital to rob workmen of life, limb, or health 
in unhealthy and dangerous employments and 
turn over the wrecks to the care of society, — 
a system which would promise to accomplish 
these ends or a part of them is worthy the care- 
ful attention of philanthropists and statesmen. 

Judgment might be challenged quite con- 
fidently upon the proposition that insurance 
such as is proposed is preeminently within the 
proper functions of a state. Let us suppose, 



J 



48 STATE INSURANCE 

if we can, a civilized state whose policies have 
been individualistic in the extreme — a state 
without public education, public highways, 
public control or supervision of waterways, 
of health, of sanitation ; having no care for the 
insane or the pauper; without a system of 
state insurance for workmen. Imagine this 
state awakening to a sense of its social respon- 
sibilities and to the need of social legislation, 
laying aside its conventional prejudices against 
collectivism and paternalism, realizing that 
there are many ends to be accomplished 
which can be reached only by collective effort. 
Imagine it slowly, tentatively, but with intel- 
ligent discrimination, starting upon its course, 
taking the step which seems of all the most 
urgent. Might not this state conclude that 
there was no object more imperative than the 
insurance of workmen ; none appealing more 
strongly to the paternal solicitude which the 
state should have for its weaker members; 
none where the best efforts of the individual 
would be so impotent and ineffectual; that 
there was nothing else within the sphere of 
the material needs of men, affecting their pro- 
tection, comfort, peace of mind, and well- 
being, for which collective means through law 
promised more beneficent results, — results, 
however, which have never been fully achieved 
without the intervention of the state. 



STATE INSURANCE 49 

Assuming, then, what all are inclined to 
admit, that insurance for workmen through 
some agency, private or public, is highly de- 
sirable, the grounds for state insurance would 
seem to be very strong. 

As has been suggested, the end can be 
achieved only by some sort of collective effort ; 
the propertyless individual may, by slow ac- 
cumulations of savings, if his wages admit of 
it, make provision for old age, but he cannot 
prepare for the accident, sickness, or inca- 
pacity that may come without warning to- 
morrow. He looks for some method or plan 
that will combine scientific accuracy, economy 
of management, absolute safety and security, 
and practical universality. 

The individual knows and can know prac- 
tically nothing as to the actual risks which 
menace him, judged by the law of averages, 
or what it ought to cost him to insure against 
any hazard or class of hazards. The actuarial 
questions involved are difficult and intricate, 
requiring the most careful weighing of com- 
plicated statistics. The state is best quali- 
fied to procure such statistics with economy 
and accuracy and to prepare reliable tables 
of morbidity and mortality; it may also con- 
struct minute tariffs of risks, as has been done 
under German laws. 1 The state is already 

1 Law of July 6, 1884, sec. 28; Konrad Hartmann, Das Gefahren* 
tarifwesen der Unfattversicherung des Deutschen Reichs. 



50 STATE INSURANCE 

partially equipped for such work, and pro- 
cures for other purposes a considerable por- 
tion of the data required. No other agency 
or source of information would command as 
great confidence as the bureau of a well- 
regulated state. It may, too, be fairly claimed 
that the state is peculiarly adapted to the ad- 
ministration of insurance and the calculations 
required, as they are largely matters of mere 
mechanical routine. 1 The workman needs to 
have the cost of insurance, in its various forms, 
authoritatively stated, and to procure it at the 
minimum of cost. Thousands are to-day dis- 
suaded from taking insurance because they 
realize that they must pay for it excessive 
rates. A competitive system, with its enormous 
reduplication of solicitation, exists at the ex- 
pense of the insured and bears most heavily on 
those most needing insurance and least able to 
bear any unnecessary burdens. The state can 
provide for insurance at the very minimum of 
cost. Much of the work required could be 
brought under existing insurance departments 
and municipal machinery. There would be 
no hordes of solicitors, all of whom must earn 
a living; no extravagantly paid officials; no 
palatial offices or costly buildings; no cor- 
ruption funds to control elections or legis- 
latures. 

1 John Rae, Contemporary Socialism, p. 417. 



STATE INSURANCE 51 

There is no subject that engages the 
thoughts of men, involving the payment of 
money or the investment of funds, over which 
there is greater solicitude as to safety and se- 
curity than that of insurance against the vicis- 
situdes of life. For this feeling there are power- 
ful reasons. Insurance against accidents, 
sickness, invalidity, and death concerns the 
most serious and important aspects of human 
affairs. If the insurer fails to perform his part 
of the contract, the loss may be irreparable or 
worse than irreparable, — the insured may not 
only have lost the funds invested, but through 
advancing age or diminished earning capacity 
he may have become unable to reinsure; the 
contract, if for an old-age pension, is to be 
carried out often at a far distant day, perhaps 
after an interval of fifty years ; if the contract 
is for life insurance it is indefinite in its dura- 
tion, but its adjustment, after the death of the 
insured, must be effected by others. But the 
contract of the state offers absolute safety and 
security; no incompetency, extravagance, or 
dishonesty of officials can impair the solemnity 
of its guaranty; through all ordinary muta- 
tions in political and financial affairs the state 
must endure; if it makes a contract to-day 
to be fulfilled in the far distant or indefinite 
future, the party interested relies upon its pro- 
mises with serene confidence. The state may 



52 STATE INSURANCE 

offer this absolute security without the accu- 
mulation of any reserve ; with the introduction 
of compulsion all necessity for a reserve disap- 
pears. 1 

The prudent man who makes provision for 
the future by accumulations of savings or by 
insurance, and the taxpayer, have a distinct 
interest in the thrift of others. They want 
some assurance that the state will not take 
from them by force a portion of their savings 
or property for the support of the improvid- 
ent. No insurance can be deemed satisfac- 
tory or successful which is not general in its 
application, viewed either from the stand- 
point of the individual or of society. There 
is contagion in thrift as well as in thriftless- 
ness, and no system of insurance can be 
highly successful or beneficent in its results 
which does not command the concurrence of 
all. The fatal weakness of every system which 
has ever been devised without the intervention 
of the state consists in its failure to reach those 
for whom it would be especially prescribed, 
those who constantly threaten to become a 
public charge or to pass a portion of their lives 
in extreme penury and wretchedness. 

Some of the objections that are urged 
against government insurance have been anti- 

1 M. M. Dawson, in Encyclopedia of Social Reforms, edition of 
1908, p. 634. 



STATE INSURANCE 53 

cipated. The objection that it would throw 
an intolerable burden upon the state will be 
touched upon in the chapter upon Incidence. 
It is sometimes urged as an important objec- 
tion that state insurance would injure or, if 
made exclusive, ruin existing companies. 
This arises from a misapprehension. Existing 
insurance companies or institutions do not 
exist for their own sake, but for the sake of the 
policy-holder. No policy-holder would suffer 
harm if no further policies should be issued. 
Perhaps he might even be benefited because 
his accumulations could not be used — as 
they often have been — to secure new busi- 
ness. The solvent company can meet all its 
obligations to its policy-holder; beyond that he 
has no interest unless of a purely sentimental 
nature. It has been urged, even, that state 
insurance should be opposed because it would 
interfere with the employment of insurance 
solicitors. On one occasion, when the Cana- 
dian Government had the subject under con- 
sideration, it was indignantly asked: "Why 
should Government take the bread from the 
mouths bf v people who are earning their living 
by life insurance ?" * This is quoted with ap- 
proval as a strong argument against govern- 
ment insurance, but it is too puerile to waste 

1 Quoted from the Toronto Globe by Walford, Insurance Cyclo- 
pcediay v, 491. 



54 STATE INSURANCE 

time over. All of the legitimate work of insur- 
ance will remain to be done under any sys- 
tem. Whatever is beyond that is superfluous 
and simply parasitic. Society cannot be asked 
to support a body of men whose labors have 
no real efficiency and do not add to a desir- 
able product. To state the question is to an- 
swer it. 

If state insurance is desirable, should it be 
voluntary or compulsory? Compulsory in- 
surance is sometimes denounced as though the 
proposition were exceptional in the consider- 
ation of the proper functions of government. 
The word compulsion, as applied to legisla- 
tion, is an odious one. Why should the state 
invade the domain of the individual's choice 
and peremptorily decide how he shall meet 
his own responsibilities ? 

It is to be premised that there is no com- 
pulsion upon the willing. The law-abiding 
citizen is not conscious of any restraint under 
laws against disorder or crime ; the thoughtful 
citizen does not resent the regulations which 
require him and his neighbors to do that 
which they should cheerfully unite in doing 
for the common good. We are accustomed by 
the long practice of civilized nations to a great 
variety of laws which are made obligatory for 
the benefit of all. We have compulsory edu- 
cation, compulsory sanitary and quarantine 



STATE INSURANCE 55 

regulations, compulsory requirements respect- 
ing the spread of noxious insects and plants, 
compulsory contributions for the support of 
the poor. These all rest lightly on the orderly 
and patriotic citizen ; rather he looks upon the 
state as highly beneficent which secures to him 
all of the privileges which can be secured only 
by establishing uniformity of action by law for 
the general weal. He does not feel the tyranny 
of law, but realizes his ideals of liberty which 
can be gained only under law. He complies 
with laws in the consciousness that all of his 
neighbors, including the exceptional one who 
is unwilling, are doing the same in the inter- 
ests of orderly government. He knows how 
impotent he would be alone or even with the 
unorganized concurrence of his fellows in 
gaining these valuable results. We think of 
compulsion as a sort of tyranny, but it can 
only be the tyranny of a majority in a repub- 
lic. This may be odious, but less so than the 
tyranny of a minority. A minority despicable 
in point of numbers, five per cent or two per 
cent of a community, may by mere inertia 
impose its will upon the majority as long as 
the will of the majority is not enacted into 
law. The state should not invoke compulsion 
for trivial reasons; but when large interests 
are involved, concerning the welfare of the 
greater portion of its inhabitants, and a desired 



56 STATE INSURANCE 

end can be accomplished only through com- 
pulsion, it ought not to hesitate. 

Is the insurance of workmen of such import- 
ance and urgency as to justify compulsion on 
the part of the state to secure it effectively? 
Such insurance cannot be made general in its 
application without compulsion. No form of 
persuasion could be effectively employed by 
the state which would not involve features far 
more objectionable than compulsion. As long 
as any scheme is entirely voluntary it will be 
evaded by the person and the class who most 
need insurance; the evasion of one would 
weaken those nearest him socially and the 
contagion of improvidence would spread to 
the thrifty. Any plan for state insurance, 
purely voluntary, would show in its operation 
the same defects which make all existing 
insurance institutions unsatisfactory. But it 
might be confidently expected, even if there 
had been no demonstration of the fact else- 
where, that compulsory insurance, when fully 
understood and appreciated, would result in 
the ready acquiescence of those concerned, as 
has been the result in the case of many other 
obligatory laws. Only the exceptional man 
would chafe under the compulsory feature. It 
would hardly be compulsory except in name. 
It is impracticable for the state in its legisla- 
tion to consider the one man who is abnormal 



STATE INSURANCE 57 

and must be forced to do that which the other 
ninety-nine do gladly. If he were to be heard 
we should have no public education worth the 
name. His inertia would always retard human 
progress. 

It has been suggested that a system of com- 
pulsory insurance would and ought to incur 
the opposition of workmen. To some extent 
this was the attitude of German workmen 
twenty-five years ago towards the scheme of 
Bismarck, especially of those who were under 
the influence of the extreme socialists. The 
most plausible ground for such opposition is 
that it would tend to introduce a line of social 
demarcation. But this position will not bear 
scrutiny, either as a matter of sound theory 
or as an appeal to experience. Lines of social 
demarcation are most effectively established 
by conditions of industrial inequality between 
classes. As long as there is economic depend- 
ence, there must be a lack of mutuality in 
industrial relations ; there will be a tendency 
towards arrogance on the one side and undue 
humility, even servility, on the other. What- 
ever ministers to equality of opportunity tends 
to efface social distinctions. To secure the 
higher independence of the individual through 
social legislation is to make a stride towards 
genuine democracy. 

The lack of mutuality is a productive cause 



58 STATE INSURANCE 

of friction between classes. As might have 
been expected, the German system of insur- 
ance has contributed to a better feeling. 
"Most full of promise for the future of the 
country are the friendly relations between the 
employing and the employed classes which has 
happily been brought about in some import- 
ant industries by the compulsory cooperation 
in carrying out the new [insurance] laws." ■ 

The workman, as well as the state to 
which he belongs, is deeply interested in his 
own efficiency, not only considered in the 
abstract but as related to the efficiency of com- 
peting nations. If a system of universal insur- 
ance by creating or intensifying solicitude for 
the life, the health, and the physical well- 
being of the workman thereby increases his 
industrial efficiency, it is a personal as well as a 
social economic gain and gives assurance that 
he is not to be at a disadvantage in an indus- 
trial competition which is world-wide. "No 
one can doubt that the general well-being of 
the working classes in Germany, which is 
strikingly visible to the eye and confirmed by 
statistics in spite of many unfavorable cir- 
cumstances, is in a large measure due to the 
insurance system." 2 "The German system 
is having a profound effect on the whole phys- 

1 W. J. Ashley, Progress of the German Working Classes, p. 134. 

2 A. Shadwell, Industrial Efficiency, ii, 147. 



STATE INSURANCE 59 

ical welfare of the nation. The general level 
of vitality, and hence the working capacity, 
is being distinctly raised as a result of it." * 
The author first cited elsewhere pronounces 
the industrial efficiency in Germany as dis- 
tinctly superior to that in either of its great 
commercial rivals, Great Britain and the 
United States. 

Further proof of the beneficence of the Ger- 
man workmen's insurance is furnished in the 
fact that it to-day commands the almost uni- 
versal acquiescence of workmen. There are 
criticisms, but they look for amendment, 
enlargement, and improvement, not repeal. It 
should always be somewhat conclusive evid- 
ence of the soundness of a proposition, not 
that it retains the approval of its friends, but 
that it gradually compels the assent of its 
opponents. It would be short-sighted in the 
extreme for workmen to oppose a plan for 
the general insurance of wage-earners against 
accidents, sickness, invalidity, old age, and 
death, — a plan whose virtue has been demon- 
strated on a colossal scale for a period of 
twenty years ; a plan, too, which must infalli- 
bly reveal defects in present rates of wages so 
far as they have overlooked the contingencies 
which such insurance covers. 

1 F. A. Vanderlip, in North American Review, clxxxi, 925. 



IV 

WORKMEN'S INSURANCE IN GERMANY 

The legislation of the German Empire upon 
the subject of compulsory insurance for work- 
men was a series of events of profound social 
significance. Accustomed as we are to note 
in history the extremely slow progress of social 
reforms in legislative enactment, the vary- 
ing insistence of public demand, the painful 
evolution of law through experiment and fail- 
ure, we must deem this achievement of the 
German people as without parallel. Within 
a period of six years a code, revolutionary in 
its nature, intimately affecting the welfare 
of the laboring people of the nation, was per- 
fected in its general plan, minutely elabor- 
ated in its details, and placed upon the statute 
books, apparently as a permanent institu- 
tion. 

To this swift but orderly procedure several 
causes distinctly contributed: There was the 
hereditary solicitude of the royal house for 
the working classes, dating at least from the 
declaration of Frederick the Great, that to 
hold the balance between classes was the 
supreme duty of the state; there was the 



INSURANCE IN GERMANY 61 

teaching of Huss and of Luther as to the 
obligations of the Christian state towards its 
members; the later discussions of German 
philosophers like Fichte and Hegel ; still later 
the more definite doctrines and demands of 
the socialists ; there had been for centuries, in 
some parts of Germany, an experience in the 
matter of insurance for those engaged in dan- 
gerous employments ; * there had been for 
thirty years some familiarity with the idea of 
state compulsion ; 2 there was especially the 
imperious will and the sagacious statesmanship 
of Bismarck. The attempts upon the life of 
the Emperor and the aggressive attitude of the 
radical socialists hastened the consummation. 
As a cure for what seemed to Bismarck a 
malignant form of socialism, he prescribed 
inoculation. 

The imperial purpose was announced in 
the message of William I to the Reichstag in 
November, 1881. His recommendations were 
from time to time repeated by his successors, 
Frederick III and William II. The plan pro- 
claimed contemplated three branches of in- 
surance — against sickness, against accident, 
and against old age and invalidity. The laws 
asked for were to aid in fulfilling "the highest 
obligations of every community based on the 

1 Ludwig Lass, German Workmen's Insurance, pt. 1, p. 12. 
7 J. G. Brooks, Compulsory Insurance in Germany, p. 34. 



62 STATE INSURANCE 

moral foundations of Christianity" ; they were 
to be "a remedy for social ills "; they were 
"to make Germany a refuge of peace." 

The bill providing for insurance against 
sickness, submitted in 1881, became a law in 
1883 ; the law respecting accidents was passed 
in 1884 ; and that respecting old age and in- 
validity, in 1889. These laws have been per- 
fected in their details and extended in their 
scope by subsequent legislation, but the whole 
scheme has developed in a remarkably sys- 
tematic and consistent manner. Emphasis has 
always been placed upon the fact that the 
benefits to be received were henceforth to be 
deemed the payment of a legal obligation and 
not a public charity. 1 

This legislation marks an era. It erects a 
mile-post from which a certain phase of so- 
cial progress is to be reckoned. Legislation 
since effected and to be effected in other coun- 
tries must in some degree trace its origin and 
inspiration from this source. Its distinctive 
feature may be regarded as a recognition of 
the workman's right to recompense as a part 
of the obligation which is due him from society. 
It has been said of the attitude of the German 
Government, that "it does not wish to be 
guided merely by a sense of pity over the un- 
satisfactory position of wage-earners, but above 

1 Sec. 77, Law of 1881. 



INSURANCE IN GERMANY 63 

all by a sentiment of justice. Its aim is not 
only to improve the material condition of 
workmen, but also to lessen and equalize as 
much as possible, in the course of time, the 
unhealthy contrasts between employers as a 
class and the working population, and more 
still it wishes to revive the feeling of fellow- 
ship between the two elements of production 

— capital and labor." * 

This plan of insurance, as far as concerns 
its compulsory features, includes in its scope 
the principal wage-workers of the Empire; 
provision is made for permitting others, not 
under compulsion, to avail themselves of its 
advantages voluntarily. A few statistics in- 
dicate the extent of its operations. Taking 
the figures of 1902, which answer for this pur- 
pose, the population of the Empire, in round 
numbers, was 58,000,000; the number of 
wage-workers, 14,500,000; the number in- 
sured under sickness insurance was 10,320,- 
000; under accident insurance, 19,083,000; 
under invalidity insurance, 13,381,000. The 
number insured against accidents was in- 
creased by a large number of small farmers 

— not included under the term wage-workers 

— and a considerable number who were in- 
sured in a double employment. The amount 
of receipts for the year was about $130,000,- 

1 Ludwig Lass, German Workmen's Insurance, pt. 1, p. 12. 



64 STATE INSURANCE 

000 for the three branches; the expenditures 
were about $110,000,000, and the accumu- 
lated funds amounted to $330 ,000,000/ These 
amounts increase somewhat from year to 
year ; for example, the amounts paid out for 
the year 1904 were about $125,000,000. 2 

It is proposed to give here only a very brief 
sketch of the scheme. The subject was very 
thoroughly and exhaustively treated in the 
work of John Graham Brooks on " Compulsory 
Insurance in Germany." 3 

Insurance against sickness is compulsory 
upon workmen and employees in all of the 
main employments, which are designated in 
some detail in the law, such as manufacturing, 
mining, railroad work, commercial and busi- 
ness pursuits — mainly upon those receiving 
wages or salary of not more than $476 per 
annum, but upon certain classes of workmen, 
regardless of amount of wages. It may be 
extended to those engaged in domestic in- 
dustry, agriculture, and forestry. 

The range of accident insurance is similar 
and it is subject to similar extension, but it 

1 G. Zacher, Guide to Workmen's Insurance, German Empire, 
Table A. Vide Appendix E. 

2 C. B. Henderson, in Charities, xix, 1191-1192. 

3 Fourth Special Report, U. S. Com'r of Labor. See, also, German 
Workmen's Insurance, in five parts, Imperial Insurance Office, 
Berlin ; and Rubinow, in Chautauquan, xli, 48 and 79, giving valu- 
able diagrams and bibliographical note; W. F. Willoughby, Work- 
men's Insurance, pp. 29-87. 



INSURANCE IN GERMANY 65 

is compulsory on those receiving wages not 
exceeding $714 per annum. 

Old-age and invalidity insurance applies 
to all workmen above sixteen years of age, to 
apprentices and domestic servants without 
regard to the amount of earnings, and to 
employees, teachers, etc., who earn less than 
$476 a year. It is intended to reach all whose 
economic condition makes such insurance 
desirable. 1 In all three branches of insurance 
there are provisions for extension and modi- 
fication, — in some cases by rules of the 
Federal Council, in others by state and com- 
munal laws. It is to be noted, too, that the 
insurance applies without regard to conditions 
of health. Reckoning not only those insured, 
but their families, the insurance extends to 
more than one half of the population of the 
Empire. There is a wholesome provision that 
the insurance shall not in any case be assigned, 
mortgaged, or attached under legal process, 
nor shall the benefits be waived by any con- 
tract between the parties. 

A distinctive feature of the accident in- 
surance law is the entire abrogation of the 
defenses of common employment and contrib- 
utory negligence. Nothing short of the inten- 
tion, not even the extreme negligence of the 
person injured, can defeat his claim, and the 

1 L. Lass, op. cit. pp. 17-18. 



66 STATE INSURANCE 

intention must be established by criminal pro- 
ceedings. 1 This may be deemed the first de- 
claration by legislative enactment of the prin- 
ciple of Asquith's apothegm, "the blood of 
the workman is a part of the cost of the pro- 
duct." But while the question of negligence 
is practically eliminated as far as the work- 
man is concerned, the employer may be held 
liable for all expenses that the association 
(Berufsgenossenschaft) may incur on account 
of any accident which has resulted from his 
intention or negligence, 2 and may be fined 
heavily for non-observance of the regulations 
imposed by the state inspectors or the trade 
associations for the prevention of accidents. 3 
In the way of benefits in sickness insurance 
the insured is entitled to free medical treat- 
ment, medicines, and remedies, or, in lieu 
thereof, to free treatment in a hospital ; money, 
to not less than one half of the average wages 
of the class to which he belongs, to maintain 
his family during disability, for a period of 
twenty-six weeks ; the same for six weeks for 
women during lying-in periods; in case of 
death, burial money amounting to twenty 
times a day's wages. The federal law fixes 
minimum amounts only which may be, and 

1 Sec. 95, Law of 1884, and sec. 8 of Law of 1887. 

2 Sec. 96, Law of 1884. 

8 K. Hartmann, German Workmen's Insurance, pt. 5, p. 8 . 



INSURANCE IN GERMANY 67 

in the majority of cases are, increased con- 
siderably by the associations — referred to 
later — which administer funds and are em- 
powered to make rules. 

Under accident insurance, the provisions as 
to medical aid, attendance, medicines, and 
hospital treatment are similar to those under 
sickness insurance, to commence at the begin- 
ning of the fourteenth week after the accident ; 
accident benefit up to two thirds of the average 
annual earnings ; and, in the event of death, 
burial money as in sickness insurance and an 
annuity to widow and children up to sixty 
per cent of earnings. 

The benefits under invalidity and old-age 
insurance are: invalid pensions for persons 
who become incapacitated for labor after 
paying premiums for two hundred weeks and 
old-age pensions for those who have reached 
the age of seventy and have paid premiums 
for twelve hundred weeks. Free medical or 
surgical treatment and temporary aid to de- 
pendents is provided to prevent invalidity. 
One half of the aggregate premiums paid may 
be refunded in the case of a woman if she 
marries, in case of death before the pension 
becomes due, and in cases falling under the 
accident insurance laws. The invalidity pen- 
sion does not wait for total incapacity, but 
becomes due whenever earning capacity is 



68 STATE INSURANCE 

reduced to one third of the normal capacity. 
Old-age pensions are given without regard to 
earning capacity. It may happen under the 
various laws that one is entitled at once to 
accident and invalidity insurance, or invalid- 
ity and old-age insurance, in which event it is 
his privilege to select the most advantageous. 
The contributions for sickness insurance 
are made, one third by the employers and two 
thirds by employees; for accident insurance, 
entirely by employers; and for old-age and 
invalidity insurance, employers and employees 
contribute equally, the state adding to their 
joint contribution, for each annuity, a sub- 
sidy of $11.90 per annum. While in accident 
insurance the employer meets the entire 
charge, he is largely exempt from other liabil- 
ity on account of accidents. The charge 
varies much according to the greater or less 
hazard of the industry; this hazard is not 
averaged between the various industries, but 
each must meet its own. It was therefore 
provided 1 that establishments should be classi- 
fied under a danger tariff which must have the 
approval of the Imperial Insurance Bureau 
and must be revised quinquennially. This 
regulation has resulted in the tabulation of all 
the tariffs of the Empire. 2 

1 Sec. 28, Law of 1884. 

1 K. Hartmann, Tariff of Risks of the Accident Insurance of the 
German Empire. 



INSURANCE IN GERMANY 69 

For the purposes of the old-age and inval- 
idity insurance, workmen are divided into five 
classes according to earnings, their contribu- 
tions and the corresponding benefits being 
graduated according to income, although a 
person is permitted to insure in a class higher 
than that to which he belongs. 

The key to the method of managing these 
various insurance funds is found in the idea 
of mutuality and self-administration. In the 
early stages of legislation the Government de- 
pended for the efficacy of its appeal upon this 
feature. It sought to utilize a multitude of 
existing institutions. In the matter of sick- 
ness insurance — which was first undertaken 
— the compulsion to insure was somewhat 
mitigated by the privilege of insuring through 
certain organizations, the insured retaining 
in their own hands the administration of af- 
fairs. There were five or six classes of asso- 
ciations all over the Empire, many of them of 
long standing, some even very ancient, to 
whom their members had been accustomed 
to look for aid in sickness. These were 
made the administrative agency for sickness 
insurance. 

The administration of accident insurance 
was confided to associations of employers. 
To them was intrusted the accumulation of 
funds under the law, and the control and regu- 



70 STATE INSURANCE 

lation of such funds under statutes of their own 
enactment, subject to the supervision of the 
Imperial Bureau. The workmen are entitled, 
however, to an honorary cooperation with 
employers in investigating accidents and to 
take part in proceedings before arbitration 
courts and the Imperial Insurance Office. 

The old-age and invalidity insurance is 
administered through insurance institutions 
which are defined geographically, the districts, 
thirty-one in number, each having its own in- 
surance office. Each institution has a com- 
mittee composed of equal numbers of employ- 
ers and insured and manages its own affairs 
independently. 

The determination of questions arising 
under these various laws rests, in the first 
instance, with the local institution, but an 
appeal may be taken from its decision, either 
by the insured or the local official, to a court 
of arbitration and thence to the Imperial In- 
surance Office. Through all proceedings the 
mere forms of law and procedure are deemed 
of less importance than consideration of the 
social and ethical questions involved. Rigid 
rules of evidence are not adhered to, probabil- 
ities are weighed judicially, solicitors are not 
required, — the party having the right to ap- 
pear personally in the highest courts, — and 
every effort is made to avoid legal disparity 



INSURANCE IN GERMANY 71 

between parties who are economically unequal. 
Tribunals seek to render material justice and 
to ascertain the intention of the legislator from 
the social point of view. 1 

It should be added that, in addition to the 
obligatory insurance provided for, there may 
be insurance through other institutions if they 
make equally efficacious provision for the 
insured. The relief department at Krupp's, 
at Essen, may be taken as an example, but in 
that department, established in 1853, the com- 
pulsion is exercised by the employer. 

The development of this scheme of insur- 
ance has displayed the care, the patience, the 
persistence of the German people in matters 
of administrative detail. It has also shown to 
them and to the world at large how essentially 
the questions involved affect society. When 
attention was directed to sickness in all of its 
features and to accidents in their various 
forms, it came to be realized that a state could 
not wisely be indifferent to anything which 
materially affects the working capacity of the 
man who toils. More than ever before it 
became the practical problem to prevent 
rather than to cure, to avoid accidents rather 
than to care for the victim, merely as a matter 
of social economy. The workingman as a 
part of the industrial machinery of the nation 

1 L. Lass, op. cit. p. 29. 



72 STATE INSURANCE 

was not to be left to his own narrow and un- 
trained prudence, but the state, through this 
legislation, was to endeavor to minimize sick- 
ness and accidents as well as to make provi- 
sion for them when they should occur. The 
distinct social and economical value of healthy 
of unimpaired strength, of freedom from ac- 
cidents, was to receive fuller recognition. If 
accidents and sickness were unprofitable for 
the state, they must be avoided, not merely 
out of a sentimental regard for the individual ; 
if machinery was dangerous, there must be 
proper safeguards; if the ordinary risks of 
an industry were extraordinarily great, there 
must be extraordinary precautions; if the 
excessive use of intoxicating liquor tended 
to increase the number of accidents or other- 
wise to diminish the workman's efficiency, 
then temperance must be urged and insisted 
upon. 

The care of the sick and injured might have 
been of the most perfunctory sort ; there might 
have been a mere literal compliance with the 
terms of the contract of insurance and with 
the law ; but — perhaps as the most natural 
and almost inevitable result — there has been 
a positive and growing tendency to go far 
beyond the strict legal obligation and to take 
the broadest and most humane view. A brief 
rehearsal of some of the measures adopted, 



INSURANCE IN GERMANY 73 

although fragmentary, is highly suggestive. 
There has been a strong tendency to extend 
the help which is effective and lasting. In the 
interests of the sick and injured there have 
been called into requisition the most highly 
trained physicians and surgeons, specialists 
for every form of disease or injury, utilizing 
the most recent discoveries in medical and 
surgical science; apparatus and appliances, 
often expensive, are furnished, such as 
crutches, supports, trusses, artificial limbs, 
false teeth; there are hospitals, clinics, sana- 
tories, convalescent homes and recreation 
grounds in the country and at the seaside, with 
the attendance of well-trained physicians, sur- 
geons, and nurses. There is, too, an aggress- 
ive promulgation of knowledge in regard to 
all these details ; instruction is given to mem- 
bers of sick-clubs as to important principles of 
hygiene ; courses of lectures are given ; popu- 
lar works are distributed for the purpose of 
disseminating information. 

The prevention of accidents to workmen 
has been deemed worthy of the very careful 
and serious study of German statesmen and 
students of social science. Elaborate collec- 
tions of statistics have been prepared to show 
the percentage of preventable accidents. 1 The 

1 G. A. Klein, Guide to Workmen's Insurance of the German 
Empire. 



74 STATE INSURANCE 

science of the prevention of accidents is stud- 
ied in all its bearings. Research and invention 
are stimulated in the direction of safety appli- 
ances by prizes. Bulletins and articles in 
periodical reviews are published; exhibitions 
are held; museums and agricultural societies 
display special collections of devices. There 
are imperial laws and trade regulations making 
it obligatory upon employers to minimize 
dangers; there are state and technical in- 
spectors and trade officials whose duty it is 
to see that wholesome regulations are faith- 
fully observed ; and there are heavy penalties 
for delinquents. 

The supervision and inspection concerns 
itself with machinery, its dangers, and proper 
safety devices ; with precautions against vari- 
ous kinds of dust, gases, vapors, and poison- 
ous substances; with the supply of respirat- 
ors and eye-protectors; with the matter of 
cleanliness, changing of clothes, facilities for 
washing and bathing ; with the location, con- 
struction, lighting, heating, ventilation, and 
general hygienic condition of buildings; and 
with the matter of intemperance, long work- 
ing hours, excessive exertions, protracted 
work in certain attitudes as bearing upon the 
fitness of men to work in a given industry. 

It may be claimed fairly for this great 
scheme of insurance that it has passed beyond 



INSURANCE IN GERMANY 75 

the phase of experiment. It encountered in 
the outset, especially before the attitude of 
Emperor William I had been indicated, bitter 
criticism and opposition. A writer in a Ger- 
man insurance journal in 1876, five years 
before the message of the Emperor to the 
Reichstag, declared that the scheme was 
Utopian and was popular only with ignora- 
muses and pot-house politicians. 1 The change 
in public sentiment may be illustrated by the 
fact that in 1889 the old-age and invalidity law 
passed the Reichstag by a small majority, the 
revision of the law in 1899 was carried almost 
unanimously. While the public mind is alert 
to suggest improvements, there is no consider- 
able body of men who would advocate a repeal. 
The plan has commended itself not only to the 
German people, but to increasing numbers 
among all the nations of Europe. While this 
result may be attributed in some measure to 
the ferment which has been working in the 
minds of men for a generation, it must be 
credited largely to the bold initiative of Ger- 
many. This took the subject out of the cate- 
gory of academic discussion and successfully 
demonstrated on a colossal scale and in a dra- 
matic fashion what might be accomplished by 
a resolute will, an honest and philanthropic 
purpose, and tireless patience in elaboration. 

1 Quoted by Walford, Insurance Cyclopaedia, v, 91. 



76 STATE INSURANCE 

It furnished a revelation as to the possibilities 
of sane, beneficent, social legislation. It has 
endured the keen scrutiny and criticism, not 
always friendly, of observers at home and 
abroad, and after a trial of twenty-five years 
has won their approval. They concur with 
great unanimity in the judgment that it has 
produced a deep and lasting effect upon the 
moral and material welfare of the working 
classes of the Empire. 1 

Never before, perhaps, on any arena has 
there been, in any brief time, through legisla- 
tion, a social awakening so significant and so 
profound. During the same period there has 
been a degree of commercial industrial pro- 
gress almost without parallel. We may not 
insist that these two facts are related as cause 
and effect, although that is the confident 
claim of competent observers ; but there would 
seem to be a refutation of the prediction that 
such legislation would prove highly disastrous 
to the Empire in its competitive struggle with 
its commercial rivals. 

But there have been moral results which far 
transcend in importance any considerations of 
material progress or commercial supremacy. 
The German people have found a solution of 

1 L. Lass, op. cit. p. 30 ; A. Shadwell, Industrial Efficiency, ii, 147, 
161 ; J. G. Brooks, Social Unrest, p. 249; I. M. Rubinow, in Chautau- 
quan, xli, 59; F. Kestner, in North American Review, clxxix, 445; 
F. A. Vanderlip, in North American Review, clxxxi, 922. 



INSURANCE IN GERMANY 77 

a problem of the greatest possible conse- 
quence to the laboring classes ; they have as- 
certained and proclaimed to the world that 
there was an obligation to these classes which 
must be paid as a matter of right rather than 
of charity; that before showing mercy it was 
necessary to do justice. 



ACCIDENT INSURANCE AND WORKMEN'S 
COMPENSATION 

i\ orkmen suffer no class of misfortunes 
which appeal more strongly to sympathy than 
accidents. Old age, the gradual impairment 
of bodily strength, even death after wasting 
sickness, do not come with the same tragic 
effect as the accident which falls like a thun- 
derbolt out of a clear sky. It may have the 
most disastrous consequences; it may befall 
the young man in the full use of his physical 
powers ; it may maim ; it may incapacitate for 
labor either temporarily or permanently; it 
may reduce a family to poverty and helpless- 
ness in an instant. These appalling features of 
accidents have disposed workmen, especially 
in dangerous employments, to the plan of 
mutual protection. For example, some form 
of accident insurance has been in existence in 
certain mining regions for centuries. 

But however keenly those engaged in dan- 
gerous industries have appreciated the perils 
which constantly menace them, the outside 
world has often looked on with too much in- 
difference. We are far more impressed by the 
loss of 22,000 men in the two years of the Boer 



INSURANCE AND COMPENSATION 79 

War than by the fact that almost the same 
number were killed in railroad accidents in 
the United States during the three years end- 
ing June 30, 1900 ; 1 and the statement, often 
repeated, that the enormous disparity between 
this country and England and other countries 
in the matter of railroad accidents is con- 
stantly growing, 2 does not arouse us to definite 
action. 

We justify our passive acquiescence in the 
existing conditions on the theory that they are 
inevitable, or that the workman knows and 
assumes all risks, and, if he meets with mis- 
fortune, has simply been a loser in the great 
game of life which we are all playing, or we 
take refuge in the exploded doctrine that, in 
trades that are dangerous, the workman has 
compensation for the danger in higher wages. 

Even if accidents in this country are not 
excessive; if the loss in industrial efficiency 
from that cause is unavoidable; if the work- 
man appreciates the risk of his work and is 
discriminately compensated, nothing except 
some form of insurance or mutual effort could 
make suitable provision for the uncertainties 
of the future. 

But as a matter of fact, a comparison of this 
with other civilized countries leads us to be- 

1 A. Shadwell, Industrial Efficiency, i, 25. 

2 Atlantic Monthly, cii, 109. 



80 STATE INSURANCE 

lieve that accidents here are far more numer- 
ous than they should be. 1 We know too that 
the workman has no adequate data for his in- 
struction as to the risks of any given employ- 
ment compared with other employments. He 
may learn in a disconnected fashion that in 
the mines of England and Wales, of 527,000 
employees 101,000 are injured each year and 
1000 are killed; 2 that the percentage is 
nearly three times as great in the United 
States; 3 that there were nearly 1000 killed 
in the mines of the United States during the 
month of December, 1907; that for the year 
ending June 30, 1906, of about 1,500,000 
employed on the railroads of the United States 
about 4000 were killed, being one of every 
387, and over 76,000 were injured, or one in 
20 ; 4 that of 56,000 employed on the steam 
railroads of Massachusetts, for an average of 
ten years, 70 were killed each year and 464 
injured, and on electric railroads a little 
larger ratio. 5 But from such figures he does not 
deduce any law of risks or make any estimate 
of the cost of assuming them. Still less does he 
adequately weigh the comparative risk of dif- 
ferent employments ; he does not fully realize 

1 A. F. Weber, in Political Science Quarterly, xvii, 257. 

2 Westminster Review, cxxxi, 500. 

3 Spring-field Republican, February 3, 1908. 

4 Nineteenth Rep. Interstate Commerce Commission, pp. 109, 129. 
6 Thirty-eighth Rep. Mass. R. R. Commission, pp. 47, 48. 



INSURANCE AND COMPENSATION 81 

that one employment may be five, ten, twenty, 
one hundred times as dangerous as another; 
that those engaged in destroying buildings 
incur risks even three hundred and fifty times 
as great as those engaged in manufacturing 
cravats by hand ! * To gather, tabulate, and 
apply the data bearing upon the risks of a 
given employment is a task of vast detail and 
requiring high actuarial skill. If the individual 
workman estimates that, for a given year, in 
the work of mining he has one chance in four 
of being injured, he may not realize how much 
that means for a lifetime of service, or the 
more important fact, viewed from the stand- 
point of insurance, that the accident which is 
his due according to the laws of chance may 
befall him in youth as well as in later life, at 
the beginning of his employment as well as 
at the end, during the first year or the first 
day as well as the last. 

We must dismiss the idea that the workman, 
in his contract of employment, intelligently 
weighs the risk ; and we must conclude, upon 
a very brief inspection, that dangerous trades 
really pay lower rather than higher wages, or, 
stated in another form, such industries com- 
mand the services of only the poorly paid 
laborers. "To the intelligent trade-union 

1 K. Hartmann, Das Gefahrentarifwesen der UnfaUversicherung 
des Deutschen Reichs, pp. 72, 75. 



82 STATE INSURANCE 

official it became increasingly evident that the 
compensatory effect of bad conditions took 
the form, not of higher rates paid by the em- 
ployer, but of a lower grade of character 
among the work-people. When the conditions 
of safety, health, and comfort in the trade fell 
below the standard of other occupations, the 
trade-union official did not find that the mem- 
bers got higher wages." * This is necessarily 
the result, and especially wherever there is 
a surplus of labor, where the supply is arti- 
ficially stimulated, or where, as in the mining 
and coal regions, there is the "relentless use 
of every known agency to keep wages (and 
therefore the standard of life) as low as pos- 
sible." 2 It is fatuous to assume that the inde- 
pendence of the individual controls the rate of 
wages ; for large classes of workmen there is no 
such thing as industrial freedom. 

But if the workman could contract upon the 
basis of absolute equality and could correctly 
estimate the margin of risks and losses, of 
waste in his industrial life of every nature, he 
could not sanely gamble upon his possible 
immunity; nor could the state permit him to 
use improvidently each day's earnings, reck- 
less of the contingencies of the future. If the 
day's wage virtually includes an amount suf- 

1 S. & B. Webb, Industrial Democracy, ii, 357. 
a J. G. Brooks, The Social Unrest, p. 28. 



INSURANCE AND COMPENSATION 83 

ficient to anticipate accidents that may befall 
him, that amount, by some method, voluntary 
or obligatory, should constitute a reserve; this 
is demanded by the interests of the individual 
and the interests of society. 

The subject of accident insurance seems to 
call for a full consideration of the question of 
employer's liability. 

About seventy years ago, within a period of 
five or six years there were three events in the 
domain of jurisprudence of signal importance 
to the industrial world. Viewed retrospect- 
ively with reference to their bearing upon the 
welfare of men, they have a distinct dramatic 
interest. 

In the year 1837 the decision was rendered 
in the celebrated Priestly case; 1 in 1838 
Prussia enacted a memorable law relating to 
the responsibility for accidents on 'railroads; 
and in 1842 the Farwell case 2 was decided in 
Massachusetts. 

The Prussian law, afterwards incorporated 
in the Imperial Code of 1871, apprehend- 
ing with rare prescience something of the 
new questions which were to arise in the in- 
dustrial world, may be deemed to have pre- 
figured the present insurance code of Ger- 
many, the most striking social legislation of 

1 Priestly v. Fowler, 3 Mees. & W. 1. 

2 Farwell v. B. & W. R. R. 4 Met. 49. 



84 STATE INSURANCE 

the century ; the two legal decisions opened a 
Pandora's box of woes of appalling magni- 
tude. There were thus marked out two dis- 
tinctly divergent conceptions of the obligations 
of the state towards workmen. 

If a general on the battlefield commits a great 
strategical blunder which costs thousands of 
lives, we are thrilled with horror, but a judge 
may so misapprehend a critical situation as 
to desolate innumerable homes for generations 
and we dumbly acquiesce as if viewing a visit- 
ation from heaven. That such a result was 
produced by these decisions will be the en- 
lightened judgment of mankind. They have 
inflicted unjust and grievous burdens upon 
two generations of English-speaking work- 
men; they have devastated the homes of 
thousands; they have aggravated beyond es- 
timate the friction between employer and 
employed. 

That the decision in each case constituted 
judge-made law is strikingly manifest from the 
language of Lord Abinger and Chief Justice 
Shaw. They deemed the cases of novel im- 
pression, to be decided with a view to the 
consequences of the decision, general con- 
venience, and considerations of policy. The 
enlightened legislator considers the ethical 
as well as the economic and purely legal as- 
pects of proposed legislation; the judge who 



INSURANCE AND COMPENSATION 85 

makes law should take the same attitude, but 
weighed by the standards of to-day these 
judges would seem to have had more regard 
for mere legal formalism than for ethics. 

Thus was firmly established the common- 
employment or fellow-servant doctrine, — the 
principle that the workman, by his contract 
of service, assumes all risks of the employ- 
ment, including the risks that may come 
through the act or neglect of his fellow serv- 
ant. The doctrine has had a phenomenal 
development, 1 and usually in the direction of 
giving larger immunity to employers. 2 The 
dicta in the Priestly case did not justify the 
judgment in the Farwell case, nor did that, 
in view of the expressed caution against 
" any hasty conclusion as to the application 
of the rule," lay a sufficient foundation for 
the vast brood of cases which trace their 
parentage to it. 

It has been said of the principle established 
that no such doctrine appears to exist in any 
country of Europe except England; 3 that it 
was bad law and bad policy. 4 

These cases were of such transcendent im- 
port; they so powerfully affected industrial 

1 Pollock on Torts, 7th ed. p. 96. 

2 Harvard Law Review, ii, 213. 
8 Pollock, op. cit. p. 97. 

4 Sir F. Pollock, before Royal Commission, Pari Rep. 1893, voL 
xxxix, pt. 1. 



86 STATE INSURANCE 

relations and conditions ; and they have reared 
so formidable an obstacle for rational reform 
in the direction of justice to workmen that 
any consideration of accident insurance com- 
pels a somewhat full examination, even at the 
risk of the charge of traveling again a much- 
trodden path. 

Undoubtedly it was the opinion of Chief 
Justice Shaw rather than that of Lord Abin- 
ger that tended to establish the law in Eng- 
land as well as in America. 1 "The most com- 
plete exposition of what constitutes common 
employment is to be found in the great judg- 
ment of Shaw, C. J. . . . which no doubt in- 
fluenced the House of Lords in Bartonshill 
Coal Co. v. Reid." 2 This was the case in 
which the doctrine was forced upon the re- 
luctant courts of Scotland. 3 

The facts in the Farwell case, as agreed 
upon, were very simple. The plaintiff, an 
engineer in the employment of the defendant, 
in the course of his employment is injured — 
loses his right hand — through the negligent 
act of a switchman, a fellow employee. Is 
the railroad company liable? The opinion, 
as befitted the importance of the principle 
involved, is an elaborate one; it has been 

1 J. F. Dillon, in American Law Review, xxiv, 180, 181. 

8 McQueen, 266; Sir Francis H. Jeune in The Petrel, 1893, p. 33. 

8 Pollock, op. cit. p. 97. 



INSURANCE AND COMPENSATION 87 

greatly admired and has been pronounced a 
classic. According to the better opinion of the 
present day, except for an unfortunate waiver 
by plaintiff's counsel, the judgment could 
have been very brief: Respondeat superior. 
The principle of that maxim should have 
been deemed of universal application. 1 

The decision seems to rest largely upon 
three supposed facts : — 

That hazardous employments command 
higher wages, and the acceptance of higher 
wages indicates an assumption of the risk; 

That each servant is an observer of the other 
and therefore knows the risk he assumes ; and 

That the servant may leave the service. 

These questions of fact were not ascertained 
by a jury ; the court did not seek for any ex- 
pert information; but they seemed so mani- 
fest that judicial cognizance might be taken 
of them. 

The first question was one for the socio- 
logist or the political economist and not for 
the jurist. 2 Generally hazardous employments 
do not command higher wages. The risk has 
very little effect upon wages. 3 Besides, viewed 
broadly and from a social standpoint, it would 

1 Pollock, sup. cit. Pari. Rep. 1893. 

2 Taylor, Employers' Liability, p. 13. 

3 Mass. Bureau of Statistics of Labor, 1883 (Wright), pp. 60, 85 ; 
Taylor, op. cit. p. 14 ; N. Y. Bureau of Statistics of Labor, 1899 (We- 
ber), p. 647; S. & B. Webb, Industrial Democracy, vol. i, p. 357. 



88 STATE INSURANCE 

be unwise in the extreme for the state to per- 
mit the workman to gamble upon his chance of 
escape from accident. He is virtually in the 
position of one who bets without the means of 
paying in case he loses; and he has not the 
data or capacity for making an intelligent esti- 
mate of the amount or value of the risk. It 
would be against public policy — upon which 
the decision is partially based — to permit 
him to play a game in which the state is to be 
the real loser if he loses. 

Nor is it true, under modern conditions to 
which this judgment with greatly added rigors 
has been extended, that such fellow servants 
have any adequate means of observing their 
fellow workmen engaged in an entirely dis- 
tinct branch of service. How much this en- 
gineer, running a passenger train from Boston 
to Worcester, passing this switchman two to 
four times a day in Newton, knew of his 
fitness, habits, or reliability, we are left to 
conjecture; he had nothing to do with his 
selection, training, or retention in service. But 
it would be infinitely absurd to claim that, in 
the complicated relations of to-day, there is 
any such knowledge. 

Nor is it true in the broadest sense that 
the workman may leave the service. It might 
be true from the standpoint of one writing 
a treatise on free will ; but Hamilton has told 



INSURANCE AND COMPENSATION 89 

us that "power over a man's subsistence 
amounts to a power over his will." * This was 
said of judges, but a fortiori it is true of the 
workman. It is well understood in the indus- 
trial world that there is no place for a work- 
man who is, from the employer's standpoint, 
captious or hypercritical, or for one who 
should assume to advise as to the competency 
of a fellow servant, even in matters especially 
concerning his own safety. To leave one's 
employment as a protest would carry with it a 
stigma; it is one of the heinous offenses. Be- 
sides, it means usually a period of idleness for 
which no provision has been made, with con- 
sequent privation and suffering for a family. 

But out of such supposed facts was evolved 
the fiction of an implied contract on the part 
of the plaintiff under which he assumed, 
among other risks, the risk that a fellow serv- 
ant might be incompetent or grossly neg- 
ligent, an implied contract, too, upon a point 
which was not contemplated by either party ! 

Upon this very frail and insecure founda- 
tion was based a decision fraught with mo- 
mentous consequences. For many decades 
thousands of workmen, maimed and incapac- 
itated, suffering, without any color of justice, 
from accidents on railroads and in factories, 
as well as the surviving widows and orphans 

1 Federalist, no. 79. 



90 STATE INSURANCE 

of the slain, were to hear the refrain of this 
doom which sentenced them often to lives of 
poverty or dependence. During all this period 
legislatures, royal commissions, and parlia- 
ments were to seek in vain to overcome the 
baleful effects of this decision. 

It is much to be lamented that "considera- 
tions of public policy and general convenience " 
were not more broadly considered. To the 
great chief justice it seemed inconvenient that 
this corporation should suffer on account of 
the neglect of one of its servants whom it had 
selected perhaps with care; but, on the other 
hand, it was certainly inconvenient that this 
engineer should be incapacitated for life 
through the fault of an agent over whose 
selection or retention he had no control and 
for whose negligence he was not remotely 
responsible. 

According to modern conceptions the solu- 
tion of the problem presented would not have 
been difficult. Here was an industry compara- 
tively new, with its own hazards. The corpor- 
ation must replace its engine, wrecked in the 
same accident, negligence or no negligence; 
that was one of the risks of the business. Why 
should it not, for the same reason and out of 
the same resources, pay for its wrecked engin- 
eer ? Why should not both losses have been 
deemed a part of the cost to the public? If 



INSURANCE AND COMPENSATION 91 

the traffic involved such losses, why should not 
the public pay for them directly ? How else, 
with any regard to the rudimentary principles 
of justice, could the loss be met ? 

At the time of this decision the world was 
slowly awakening to the fact of great indus- 
trial changes. The Factory Age had come ; 
great inventions and the application of steam 
to machinery were transforming the indus- 
trial world. It was gradually dawning upon 
the minds of thoughtful men that these great 
changes had made imperative new standards 
of law as related to industry. The problem 
was dimly apprehended, as indicated by the 
Prussian law referred to as well as by the fac- 
tory legislation which had engaged the atten- 
tion of England since the beginning of the 
century. 

Possibly the chief justice was one of those 
who were then patronizingly characterizing 
the law of Prussia as the benign paternalism 
of a despotic power. But if Prussia reached 
a point in social legislation in 1838 which Eng- 
land attained with much difficulty in 1880, and 
Massachusetts in 1887 ; if that conception of the 
obligation of the state to the laboring classes 
in its gradual but logical development in the 
German Empire of to-day has challenged the 
attention and admiration of the civilized world, 
one ought, to-day at least, to discern in it some- 



92 STATE INSURANCE 

thing of the grasp and prescience of true states- 
manship. 

But in connection with the remedies which 
have been sought to mitigate the common- 
employment doctrine the law of contributory 
negligence must be considered. This has al- 
ways borne heavily upon the workman. It is 
very ancient. It has been said that " it has ex- 
isted from time immemorial and is not likely 
to be changed in all time to come." ' The 
reasoning by which it has been supported 
savors more of the refinements of mediaeval 
logic than of modern modes of thought. 
Contributory negligence is the slightest want 
of ordinary care contributing proximately to 
the injury. 2 If a workman contributes one 
per cent of the elements which go to make up 
an accident and the employer ninety-nine per 
cent, the workman cannot recover. Moreover, 
if there is no fault, if an accident is simply 
an incident of the business, le risque profes- 
sionnel, or attributable to superior force, these 
risks the laborer is deemed to have assumed. 
Even, further, if there is gross fault on the 
part of the employer, if certain precautions 
have been neglected by him, if stringent pro- 
visions of law have been flagrantly violated, 
yet, if the workman knew of these acts of 

1 Black, C. J., Perm. R. R. Co. v. Aspell, 23 Perm. St. 140. 

2 Beach, Contributory Negligence, 3d ed. p. 23. 



INSURANCE AND COMPENSATION 93 

carelessness or violations of law, he is pre- 
sumed to have waived any remedy. He is 
confronted with the maxim, volenti non fit 
injuria. So the very severity of treatment in 
many employments, overwork, excessive hours, 
working at too great speed, the assenting to 
labor under circumstances of great danger 
because required to do so, the necessity of 
satisfying the importunate demands of over- 
seer or master as bearing upon retention or 
promotion, — the elements, in a word, which 
make care difficult or impossible, — have all 
been charged up to the workman ; the stand- 
ard of the court-room is too high for him ; he is 
found to have been wanting in ordinary care 
and remediless. Under these conditions there 
was not a strong inducement for the employer 
to exercise care in the construction of build- 
ings, in the arrangement or adjustment of 
machinery, in safeguarding the workman. 
It was cheaper to let him take his chances; 
to replace the killed and wounded by new 
recruits ; to treat the human material as neg- 
ligible when compared with the cost of ex- 
pensive safeguards. 

Data have been carefully collected from 
varied and widely distributed industries to 
indicate the source of accidents and the re- 
sponsibility for them, showing that nearly 
one half may be charged to the risque pro- 



94 STATE INSURANCE 

fessionnel or superior force, three tenths to 
the fault of the employee, and about one sixth 
to that of the employer. 1 But in America and 
England, before there were any modifications 
of the law, the employer's share would have 
been much greater. Still, it has been esti- 
mated that not more than fifteen per cent ever 
recovered damages. When we consider the 
expense of litigation, the feeling engendered 
between employer and employee and conse- 
quent loss of any future employment, it can 
easily be seen that conditions would not have 
been much worse if there had been an abso- 
lute denial of any remedy. 

England partially awakened to the gross 
injustice resulting from these conditions about 
forty years ago. The evils began to seem in- 
tolerable. In every great industrial centre 
there were concrete and ever-recurring illus- 
trations of the wrongs inflicted. But it took 
ten years of agitation and discussion to effect 
the passage of the law of 1880. 2 It must be 
borne in mind that this is substantially the 
same as the law of Massachusetts of 1887, 
which is still in force. This measure, so mild 
and ineffectual as to be soon discarded as an 
ill-fitting garment, was strongly opposed by 
all the great mining, manufacturing, and rail- 

1 G. A. Klein, Guide to Workmen's Insurance, p. 27. 
' 4S&44 Vict. c. 42. 



INSURANCE AND COMPENSATION 95 

road interests. Dire disaster was predicted if 
it should become a law ; capitalists would not 
put money into mines; in fact, it was even 
discovered that it would be a plunge into 
socialism ! 

But this law, as a measure of social equity, 
proved utterly inadequate. The agitation 
was renewed. Chamberlain characterized it 
as a half-hearted compromise and suggested 
that it should have been called, in view of the 
litigation which resulted, "the lawyers' em- 
ployment bill." * Under the law the liability 
of the employer was almost insusceptible of 
proof, and the defense of common employment 
almost sufficient to nonsuit. 2 Asquith declared 
that it was an elaborate series of traps and pit- 
falls for the unwary litigant, barren of result, 
and a reproach to the legislature. 3 

The tardy awakening of England to the 
evils of the industrial situation furnishes a 
curious and instructive illustration of the 
inertia of public sentiment. Forty years after 
the decision in the Priestly case, Mr. Lowe, 
afterwards Lord Sherbrooke, as chairman 
of a parliamentary commission charged with 
the consideration of employers' liability legis- 
lation, reported: "The commission are war- 

1 Hansard, 1897, vol. xlviii, p. 1465. 

2 Mavor, Workmen's Compensation, p. 5. 
8 Hansard, 1897, vol. xlix, p. 753. 



96 STATE INSURANCE 

ranted in regarding these judicial innova- 
tions" (referring to the Priestly case and the 
doctrine subsequently developed therefrom) 
"with the utmost jealousy and dissatisfaction. 
They observe with some surprise that the com- 
mon law as it was believed to be up to 1837 
has been entirely altered by judicial decision, 
and that not in any abstruse or remote point, 
but in a matter which most nearly concerns 
Her Majesty's subjects . . . effected by means 
which appear to the commission to be of the 
most questionable nature, the inventing and 
enforcing a contract which never existed." 1 
Before this commission Lord Justice Brett 
expressed the belief that there was no just and 
logical reason why the master should not be 
liable to a fellow servant and that the doctrine 
arose principally from the ingenuity of Lord 
Abinger in suggesting analogies. 2 Sixty years 
after the decision, while pleading for the law 
of 1897, Asquith said that the doctrine was 
invented by the bench, and was developed by 
the ingenuity of judges; that it had been a 
legitimate grievance to the working classes and 
had established fantastic distinctions between 
the position of workmen and third parties. 3 
Birrell, present Secretary for Ireland, ex- 

1 Pari. Rep. 1877, vol. x, no. 285, p. ix. 

2 Ibid. p. 115. 

8 Hansard, 1897, vol. xlviii, p. 1435. 



INSURANCE AND COMPENSATION 97 

pressed himself with greater emphasis : "The 
doctrine was invented in 1837 ; Lord Abinger 
planted it; Baron Alderson watered it; and 
the Devil gave it increase." * The social un- 
rest of which these discussions were the index 
made legislation urgent. A bill was brought 
in by Asquith in 1893 which proposed to 
abolish the common-employment doctrine vir- 
tually and in terms negatived the application 
of the maxim volenti non fit injuria. It pro- 
posed to include substantially all workmen. 
The bill failed through the opposition of the 
House of Lords to the contracting-out clause. 
It has been pointed out that there was thus 
a very narrow escape from the woes which the 
fervid imagination of Lord Abinger had pic- 
tured. 2 It remained for a Tory Government 
and the leadership of Chamberlain in the 
House of Commons to bring about substantial 
legislation in the celebrated Workingmen's 
Compensation Act of 1897. 3 England thus put 
herself in the ranks — though by no means in 
the front rank — of civilized nations in this 
kind of industrial legislation. They had been 
led by Germany in the compulsory insurance 
laws of 1883-84, which instantly challenged 
the attention of all the nations of Europe. 4 

1 Hansard, 1897, vol. xlix, p. 692. 

2 A. H. Ruegg, in Century of Law Reform, p. 272. 
8 60 & 61 Vict. c. 57. 

* A. F. Weber, in Political Science Quarterly, xvii, 265. 



98 STATE INSURANCE 

Laws in the nature of compulsory insurance or 
workmen's compensation acts were enacted: 
In Austria, in 1887; Norway, 1894; Finland, 
1895; France and Italy, 1898; Switzerland, 
1899 ; Xew Zealand, South Australia and Spain, 
1900 ; Sweden, Netherlands, and Greece, 1901 ; 
British Columbia and West Australia, 1902; 
Russia, Denmark, and Belgium, 1903; Cape 
of Good Hope and Queensland, 1905; and 
Hungary in 190?. 1 

The English Law applied to the so-called 
dangerous trades and extended to about 
half of the workmen of the kingdom — spe- 
cifically to employees of railroads, factories, 
mines, quarries, and construction and razing 
of buildings; by the amendments of 1900 and 
1901 those engaged in agriculture and ship- 
lading were included. As to the employments 
to which the law applied, it practically abol- 
ished the common-employment and contrib- 
utory-negligence defenses to actions. It has 
been said that while it did not — in terms — 
abolish the common-employment doctrine, it 
went far beyond its abolition. 2 It left in force 
the law of 1880 and the common-law reme- 
dies. 

In Great Britain there has never been any 

1 Annuaire de Legislation Etrangere, 1903: G. Zacher, Tables, vide 
Appendix E: Bulletin Xo. 74, January, 1908, U. S. Bureau of Labor, 
pp. 121-143. 

2 A. H. Ruegg, Employers and Workmen, p. 139. 



INSURANCE AND COMPENSATION 99 

serious intention, either from the standpoint 
of employer or employees, of receding from 
the position taken in 1897 ; but there has been 
constant agitation and discussion as to liberal- 
izing the law and enlarging its scope. There 
as in other countries there was a disposition to 
make of less importance the element of special 
danger and to make the principle of the law 
applicable to all employments. In Belgium, 
under the law of 1903, about nine tenths of 
the working population were included. 

Through a Parliamentary Commission, with 
Sir Kenelm Digby as chairman, a very thor- 
ough and exhaustive examination of the whole 
subject was made ; a large amount of evidence 
was taken ; the working of the law of 1897 was 
carefully reviewed ; and the history of similar 
legislation in other countries was presented. 1 
On the basis of the report of this commission 
the Workmen's Compensation Act of 1906 
was passed. This law (which went into effect 
on July 1, 1907, 6 Edward VII, c. 58) re- 
tains the provisions of the law of 1897, which 
it repeals, but is applicable to 6,000,000 ad- 
ditional workmen, and virtually includes all 
workmen where the relation of master and 
servant exists. 2 It had been said of the law 

1 Pari Rep. 1904, Cd. 2208; Ibid. 1905, Cd. 2269, 2334, 
2458. 

8 See Appendix III. 



100 STATE INSURANCE 

of 1897 that it was imported from Germany 
in an unmanufactured state and inartistically 
made up. 1 The law of 1906, as well as that of 
Belgium and some other countries, indicates 
an approach towards the German scheme. 
This idea found expression in the memoran- 
dum attached to one of these reports: "I do 
not believe, however, that the principle of 
personal liability is one which can be effect- 
ively applied, especially in the case of small 
employers, unless accompanied by compulsory 
insurance. I am in favor of compulsion, pro- 
vided insurers are offered national insurance." 3 
There is an admirable treatise upon the Eng- 
lish act of 1906, giving the text of the law, 
legal decisions, with appendices containing 
rules of procedure, forms, regulations, offi- 
cial publications, etc. 3 

It is perhaps natural that the United States, 
and especially that state which furnished the 
great jurist who pronounced this doom upon 
English-speaking laboring men the world over, 
have clung with tenacity to this common-em- 
ployment doctrine, although there have been 
many attempts from the beginning to mitigate 
its severity. Georgia, as early as 1856, by a 
few lines of legislation annulled the common- 

1 Ruegg, op. cit. p. 146. 

2 Mem. of Barnes, Cd. 2208, sup. cit. p. 131. 

• A. Elliott, Workmen's Compensation Act of 1906. 



INSURANCE AND COMPENSATION 101 

employment doctrine as to railroads and has 
legislated against both that and the contrib- 
utory-negligence doctrine since. 1 Recently 
Montana, 2 and Colorado, 3 have abolished 
the law of common employment. 

During the interval there have been legis- 
lative as well as judicial protests in great 
variety: sometimes to negative what seemed 
to be unwarranted severity in judicial inter- 
pretations; to discriminate between the liabil- 
ity for the negligence of a vice-principal and 
other common employee ; to introduce a rule 
of comparative negligence, analogous to that 
in maritime law, in place of the severe rule of 
contributory negligence. 

It is not proposed to give here any sketch 
of legislation upon these points; it has been 
summarized recently in convenient form. 4 

Yet it is undoubtedly true, as has been 
stated by competent authority, that the posi- 
tion of workmen in regard to compensation 
for injuries is not yet so advanced as it was in 
England under the law of 1880, and incom- 
parably less advanced than in Germany, 5 and 

1 Georgia Laws, 1855-56, p. 156, Appendix B ; Code, 1895, sees. 
2321-2323. 

2 Laws of 1905, ch. 1. 8 Laws of 1901, ch. 67. 

4 Bulletin No. 74, January, 1908, U. S. Bureau of Labor, pp. 
1-156; N. Y. Dept.of Labor, Bulletin of March, 1906, pp. 91-97; 
Sir K. E. Digby in Yale Law Journal, xvii, 485. 

6 A. Shadwell, Industrial Efficiency, ii, 170; W. F. Willoughby, 
Workmen's Insurance, p. 328. 



102 STATE INSURANCE 

that the United States stands alone among the 
civilized nations of the world in adhering to 
the law of negligence as a solution of the pro- 
blem of industrial accidents, while the govern- 
ments of Europe and Australia have, with 
one or two unimportant exceptions, made the 
financial burden of injuries to workmen a 
charge upon the particular industry. 1 

In Massachusetts, where the common-em- 
ployment doctrine seems to have developed 
far beyond the intention of its great author, 
the subject attracted much attention a gen- 
eration ago, undoubtedly stimulated in some 
degree by the parliamentary and other dis- 
cussions in England and the passage of the 
Act of 1880. In 1882 the legislature directed 
the Bureau of Labor to investigate and report 
its conclusions. There was a thorough inves- 
tigation under Carroll D. Wright, resulting in 
an admirable report to the legislature of 1883, 
in which the situation was discussed thor- 
oughly in all its bearings. It was recommended 
that a law should be enacted either like the 
English statute or, preferably, a very simple 
and brief law abolishing the defense of com- 
mon employment and materially modifying 
that of contributory negligence. Four years 
later, in 1887, a law was enacted which was 
substantially the English act. It had been 

1 N. Y. Labor Bulletin, sup. cit. pp. 7 and 95. 



INSURANCE AND COMPENSATION 103 

adopted in Alabama four years earlier. 1 That 
legislation is still in effect practically. While 
in England it proved very unsatisfactory to 
all parties after a very brief trial, we have not 
materially amended it. In 1903 the subject was 
again up for consideration in Massachusetts 
and a select committee was provided for, 2 to 
consider this among other labor questions. In 
its report (January, 1904) a bill was recom- 
mended 3 patterned after the English Work- 
man's Compensation Act of 1897. It reads 
like a convincing document, but apparently re- 
ceived scant consideration from the legislature. 
Again, in 1907, 4 a recess committee made up 
from members of the legislature to consider 
labor questions was appointed, to report to the 
next legislature. In this report 5 the majority 
of the committee 9 oppose any substantial legis- 
lation towards providing for compensation to 
workmen. They repeat, with much-diminished 
force, the stock arguments of a generation 
ago, which have become threadbare and much 
discredited. To these brief reference will be 
made later. The minority of the committee 
renew the recommendation of the commit- 
tee of 1903 that the substance of the Eng- 
lish law be enacted or that there be a brief 

1 Civil Code, 1907, sec. 3910. 2 Res. 1903, ch. 87. 

8 Rep. pp. 47-55. 4 Senate Journal, p. 1165. 

5 House Document, no. 1190, January, 1908. 

6 Report, pp. 49-60. 



104 STATE INSURANCE 

law taking away the defense of common em- 
ployment. 1 

But in this country we are still powerfully 
dominated by the dogmas pronounced by 
Judge Shaw two generations ago. He was 
profoundly impressed, as his defenders aDd 
imitators have been ever since, 2 by a sense of 
the great injustice that the employer would 
suffer if held liable for an accident which he 
could not have prevented. It is obvious 
enough to-day that there are three parties to 
be considered in the event of an industrial ac- 
cident affecting workmen : the victim, the em- 
ployer, and, third, the patron, the consumer, 
society. We cannot judge justly if we fix our 
minds too intently upon any one of these to 
the neglect of the others. We should follow 
the injunction by Lord Abinger in the Priestly 
case and "look at the consequences of a 
decision," the bearing upon each of these 
three parties. All serious accidents to work- 
men involve hardship and a burden which 
must rest somewhere. By picturing too vividly 
the possible consequences to one of these par- 
ties we may practically ignore the others. We 
can conceive of a case of novel impression 
being so nicely balanced that either one of two 
decisions may be defensible as a matter of pure 

1 Report, pp. 61-76. 

2 e. g. Judge Dillon, American Law Review, xxiv, 175. 



INSURANCE AND COMPENSATION 105 

legal formalism, but if we make law either as 
legislators or judges we must have some regard 
for economic and ethical considerations. In 
neither case can the law determine the real in- 
cidence of the burden. If it is imposed upon 
the workman who is injured and who is pro- 
pertyless, whose working capacity, now ruined 
or impaired, was his only asset, he must turn 
it over to society upon whom he and his family 
must depend ; if imposed upon the employer it 
may either result in a diminution of dividends 
and profits, or be added to the price of the pro- 
duct as a part of the cost, thus reaching so- 
ciety again by another route. Still, it is of the 
greatest economic and social consequence by 
which route the burden takes its course before 
reaching society, or any portion of the public. 
Meantime we cannot ignore as negligible those 
industries which yield large profits and yet 
insist that it is not socially inequitable for the 
profit sharers to use this human material, im- 
providently often, and afterwards throw the 
wrecks upon society. 

The employer tells us that the cost of ac- 
cidents cannot be added to the charge for the 
traffic or product, as it would make that cost 
too high. This is nearly equivalent to saying 
that while the public is not willing to pay this 
enhanced cost as such, it will submit if it is 
disguised in the form of poor-rates. We are 



106 STATE INSURANCE 

admonished, too, that the state or government 
which puts such a burden upon industry will 
be at a great economic disadvantage as com- 
pared with other states, practically a claim 
that the industry is not self-supporting, that it 
is parasitic. These arguments are not new. 
Thirty years ago the same arguments were 
used in Great Britain. The legislation then 
proposed, substantially the present law of 
Massachusetts, was certain to drive capital 
from the country, to close mines, to paralyze in- 
dustry. The Attorney-General in 1876 pointed 
out the terrible liabilities that it would throw 
upon the country ; * but neither that law nor 
the "revolutionary" compensation act of 1897 
seems to have had that result. A little more 
recently the same appeal was made in Ger- 
many against the proposed compulsory insur- 
ance legislation. But it has not been heard 
since, and the German Empire has had a phe- 
nomenal period of development and industrial 
prosperity such as no nation ever surpassed. 
It has been claimed by very high authority 
that the cause of this material progress and 
general well-being of the working classes is 
largely attributable to the beneficence of these 
very laws. 2 These adverse arguments do not 

1 N. Y. Bureau of Labor Statistics (1899), p. 677. 

a A. Shadwell, op. cit. ii, 147 ; F. W. Zahn, German Workmen's 
Insurance, pt. 5, p. 21; F. A. Vanderlip, in North American Review, 
clxxxi, 925. 



INSURANCE AND COMPENSATION 107 

take into account the immense value of meas- 
ures that tend towards social peace ; the im- 
portance of impressing upon employers the 
economic profit of saving life and limb; the 
wastefulness of litigation and contention 
resulting from a mischievous legal or indus- 
trial system ; the fact that rational legislation 
is contagious and that other states would be 
disposed, compelled, to follow an inspiring 
example, as the nations of Europe have fol- 
lowed Germany. 

Clearly, it would seem, the workman should 
be compensated for accidents that befall him 
through the fault of his employer; through 
the inevitable risks of the industry; through 
superior force; through the fault of a fel- 
low workman. But there are some that come 
through his own negligence — about three 
tenths or one fourth of the whole, perhaps. 1 
Why in any view of the case ought he to be 
compensated for these? Ordinary care, as 
judged by juries under the instructions of 
courts, really comes to mean such care as the 
average man would exercise — as high, prob- 
ably higher. The juror, in the quiet of a court- 
room, probably very much overestimates the 
presence of mind that he would be capable of 
in an emergency, the occasion when accidents 
occur. If we have an industry requiring a 

1 G. A. Klein, German Workmen's Insurance, pt. 2, p. 27. 



108 STATE INSURANCE 

thousand workmen, presumably five hundred 
of them would fall below the standard by 
which they must be tested. They have been 
selected for their working capacity and not for 
the alertness of mind by which they avoid 
accidents. But these five hundred men must 
work, and any impairment of the individual's 
efficiency or inability to work on account of 
injuries even through his lack of ordinary care 
— of which he is not quite capable — must 
be, in the nature of things, a part of the total 
cost of the industry. To what other account 
can it be charged ? It cannot be charged to the 
individual, because by that very injury he has 
probably become bankrupt. We must revert 
to the maxim that "the blood of the workman 
is a part of the cost of the product." Obvi- 
ously if an industry cannot endure that burden 
it is not self-sustaining. Society for its own 
sake and that of the individual must so regard 
it. No other solution of the problem satisfies 
intelligent, modern conceptions of social ob- 
ligations. 

It is surprising that the world should have 
been so slow to perceive how grievous and 
unjust the law is which has attempted to 
impose this burden of accidents upon the 
workman ; slow to realize how vain and im- 
potent this attempt has been; slow to profit 
by the instructive example that Germany has 



INSURANCE AND COMPENSATION 109 

shown us for a quarter of a century. We in- 
dulge in illusions. We look on complacently, 
persuading ourselves that we have compelled 
the workman to assume risks and to provide 
in some way for future emergencies out of his 
wages, ignoring the fact that the burden of 
such risks must virtually be borne by society. 
The recent report of the recess committee in 
Massachusetts referred to, terms society's re- 
sponse beneficence 1 and looks upon the pro- 
visions which most civilized nations have made 
as munificent. 2 But the workman who is suf- 
fering injustice from industrial and economic 
conditions does not wish to seem to be the 
recipient of beneficence as a substitute for 
justice. 

The appalling colliery disasters in Great 
Britain during the sixties awakened that na- 
tion. Her statesmen and legislators began to 
inquire whether the market price of coal re- 
presented the real cost, and also whether the 
employers' exemption from liability as to these 
disasters might not, in some degree, account 
for their frequency. Employers' liability acts 
were advocated not only with the purpose of 
securing compensation for the victims of ac- 
cidents, but with the expectation of diminish- 
ing their number and severity. The great cry 
of the workmen themselves was, We want 

^Report, p. 53. 2 Report, p. 54. 



110 STATE INSURANCE 

immunity rather than indemnity. It was the 
claim of Salisbury, during whose primacy the 
law of 1897 was passed, that it would prove 
a life-saving mechanism. We may well re- 
gard this aspect of the question in this country 
where industry is carried on with less regard 
for human life and safety than in most others. 
Viewed in its merely commercial aspects, a 
nation cannot afford unnecessary waste of life. 
It has been estimated that it costs fifteen hun- 
dred dollars to rear the boy and youth until 
he reaches the age for work ; he becomes too 
costly a piece of mechanism to be exposed to 
needless hazards ; in the highest sense, the life 
and health of the workman are proper sub- 
jects of the state's solicitude. Considerations of 
economy and philanthropy alike demand not 
only that accidents shall be guarded against, 
but that their consequences, unjust to the vic- 
tim, shall as far as possible be averted. 



VI 

EXISTING INSTITUTIONS 

In the consideration of the problem involved, 
— provision, more especially by or in behalf 
of the more needy and helpless members of 
a community, for the exigencies of sickness, 
accidents, and invalidity, — account must be 
taken of existing institutions. Are any of them 
or all of them together sufficient to furnish a 
solution of the problem ? If inadequate, what 
are their limitations and defects ? 

Savings banks are very promptly and con- 
fidently offered as a panacea for all of the 
industrial or financial ills which may overtake 
those who have made no other provision for the 
future. But they are entirely inadequate and 
unsuitable, as a moment's consideration will 
show. There is not much in common between 
savings banks and a system of insurance. De- 
posits are made in savings banks in the hope 
of continued life, health, and earning capacity, 
but insurance is undertaken with a realization 
of the uncertainty of all of these things. The 
slow accumulations of savings, however stead- 
fastly adhered to, cannot supply a fund which 
may be needed to-morrow on account of a 
sudden and unforeseen misfortune; but by 



112 STATE INSURANCE 

insurance the workman, if his earning capac- 
ity admits of any saving, may provide for all 
contingencies and industrial risks, even if they 
arise to-morrow. The purpose of insurance is 
to distribute the misfortune of the one among 
the many, and no individual effort of any 
nature can supply its place. Reference has 
already been made to the misleading charac- 
ter of the savings-bank data usually cited, and 
the undue importance which has been assigned 
to such data, either as indications of general 
prosperity or as bearing upon the need of a 
more general insurance for workmen. In the 
discussion of a broader insurance for those 
most needing it, the savings bank hardly con- 
cerns us. 

Even in the matter of provision for old age 
the savings bank has a certain disadvantage 
as compared with insurance. The man of 
scanty earnings, for whom any saving is dif- 
ficult, does not need to make provision for old 
age, but merely for the probability of the in- 
validity which comes with old age. It costs a 
man at twenty-five or thirty only about one 
half as much to provide for the contingency of 
old age, through a purchase of an annuity, as 
it would to provide for the certainty by a sav- 
ings-bank deposit. The workman who cannot 
save enough out of his wages for the latter 
may provide for the former; in other words, 



EXISTING INSTITUTIONS 113 

he can make twice as liberal provision by way 
of annuity as by a deposit in a savings bank. 
At the age of twenty it would cost to purchase 
a deferred annuity of $100, to commence at 
the age of sixty-five, only $6.50 per annum, or 
$123.20 in a lump sum, in a New England 
company. 1 But it would require a savings-bank 
deposit of $235 at the same age to raise the 
same annuity, computing interest at three per 
cent. The advantages of the savings deposit 
are obvious, in some aspects ; but scientifically 
considered, either from the standpoint of the 
individual or of society, the annuity plan, or 
insurance, satisfies the requirements in the case 
of the workman whose wage is little above the 
"absolute minimum" of the cost of living, and 
the savings bank does not. 

The conception of mutual self-help is nat- 
ural and the practice is very ancient. Burial 
societies in China, the eranoi of the Greeks, 
the guilds of the Teutons in mediaeval times, 
all speak of the human tendency towards asso- 
ciation for fellowship and for mutual aid in 
times of adversity. They lacked much in sys- 
tem and orderly adjustment, but they indi- 
cated a strong social instinct groping towards 
the light. Associations more nearly resem- 
bling modern institutions are also of long 
standing. In some parts of Germany miners' 

1 In France it would cost only $102.81 (W. F. Willoughby, p. 121). 



114 STATE INSURANCE 

sick-clubs (Knappschaftskassen) maybe traced 
back six hundred years. 1 

Organizations were formed in Great Britain 
soon after the disappearance of the guilds, 
having a somewhat uniform origin, constitu- 
tion, and purpose, which have come to be 
known as Friendly Societies. They date from 
about the beginning of the eighteenth century, 
and in their present form are said to have been 
influenced largely by societies in London 
formed by the Huguenot refugees. As early as 
1793 they were recognized by statute, and re- 
ferred to as "societies of good fellowship " ; and 
again in 1819 where the society is defined as 
"an institution whereby it is intended to pro- 
vide, by contribution, on the principle of mu- 
tual insurance, for the maintenance or assist- 
ance of the contributors thereto, their wives or 
children, in sickness, infancy, advanced age, 
widowhood, or any other natural state or con- 
tingency whereof the occurrence is susceptible 
of calculation by way of average." These 
two features of good fellowship and mutual 
aid have always been preserved. It is probable 
that they engaged the attention of legislators 
at that date both on account of their possibil- 
ities for good and the abuses of which they 
were susceptible. Since that time they have 
often been the subject of legislation, but with 

1 L. Lass, in German Workmen's Insurance, pt. 1, p. 12. 



EXISTING INSTITUTIONS 115 

a view to guide rather than to control them. 
They were originally organized with very little 
system, and were loosely and unscientifically 
managed. While beneficent in their declared 
purposes and, in the best societies, in their 
work, great abuses arose. Ten or twelve acts 
of Parliament culminated in those of 1875 and 
1896. Partly through the persuasive effect of 
these laws and partly through the initiative of 
some of the sounder societies like theManches- 
ter Unity, the general situation has improved 
to some extent. These statutes provide for 
registration and offer many inducements, but 
it is still optional, and less than one half of the 
societies of the kingdom are registered. The 
registered societies are required to make an- 
nual statements, quinquennial reports upon 
mortality, and quinquennial valuations. 

These societies furnish an interesting study 
in social science and illustrate the evolution of 
a semi-scientific institution from the merely 
benevolent organizations of the earlier day. 
They form to-day a type of voluntary associa- 
tions, the best, perhaps, for their purpose, in 
existence, when found at their best. For this 
reason they must enter into our consideration 
of systems of insurance. 

But there is another side to the picture. 
Notwithstanding the attempts to regulate 
these societies and to place them on a better 



116 STATE INSURANCE 

and sounder basis, there can be no assurance 
of the competency or the honesty of their 
management. Canon Blackley said of them 
that while some were founded, supported, and 
managed in ignorance, a large class were fos- 
tered and carried on by systematic and delib- 
erate villainy. 1 There could be no guaranty of 
their soundness or their permanence. Out of 
48,000 such societies which had existed there 
seemed to remain only 26,000 when the Act of 
1875 went into effect, and of these only 11,000 
responded to the registrar's call for returns. 
There had been a widely prevalent disregard 
of proper bases of computation for contribu- 
tions, assessments, and benefits, and a large 
proportion of all of the societies have usually 
been actuarially insolvent, — in 1884, five 
sixths of the whole. 2 In 1895 Chamberlain 
declared that their aggregate deficiencies 
amounted to $35,000,000. 3 Eight years later, 
in spite of warnings, it appeared by the report 
of the chief registrar that seventy per cent of 
the registered societies disclosed deficiencies, 
and collectively they could not pay more than 
eighty- three per cent of their liabilities. 4 Pre- 
sumably the condition of the unregistered so- 
cieties is much worse. 

1 W. J. Blackley, Thrift and Independence, pp. 75, 80. 

8 Blackley, op. cit. pp. 60, 105. 3 National Review, xxiv, 592. 

8 Report, December, 1903, p. 64. 



EXISTING INSTITUTIONS 117 

Moreover, the wage-earner may well be 
diffident as to the probability of his persistence 
in these and similar societies. He should give 
weight to the statistics which indicate that 
probability. It has been found that out of 
100,000 joining at 18 there will be, without 
allowing for secession, 71,353 remaining in 
the society at 50; but if allowance be made 
for secession, there will be only 15,325. In 
other words, while the claims of 28,647 had 
been paid at death, 56,028 — about two thirds 
— had left voluntarily. 1 

We may say of these societies and all others 
having similar defects and characteristics that 
they are not necessarily upon a sound actu- 
arial basis ; that many of them are conducted 
at a very great expense relative to receipts, 
the collecting societies which deal with the 
lower class of wage-earners often expending 
more than one half of their contributions; 
that legislation, both in England and else- 
where, fails to control or direct them so as 
to give substantial protection to members; 
that the uncertainty and financial insecurity 
are such as to discourage rather than to fos- 
ter thrift ; that as a system they constitute a 
crude, inadequate, wasteful method of reach- 
ing a great social need; and that by their 

1 Insurance and Savings; Report of Charity Organization Society 
of London, 1892, p. 58. 



118 STATE INSURANCE 

existence they often preclude the introduction 
of something far better than they can offer. 

Trade-unions offer mutual benefit features 
somewhat similar to those of friendly so- 
cieties, but that is not the main object for 
which they are created. The criticisms which 
apply to friendly societies are applicable to 
these also, but the defects in them are even 
greater. The promises of the trade-unions as 
to the relief of members are necessarily con- 
ditional upon the state of funds at the mo- 
ment. These may have been exhausted at the 
moment when they are most urgently needed 
for relief purposes. The insecurity of the 
friendly side of trade-unionism is inherent in 
the conjunction of trade and friendly purposes, 
but at the same time the insurance feature 
adds to the attractiveness and cohesiveness 
of the union and creates among its members 
a strong opposition to government insur- 
ance. 1 

This attitude of trade-unions and labor or- 
ganizations towards state insurance is short- 
sighted. Beyond doubt a well-devised system 
of workmen's insurance, modeled perhaps 
after that in Germany, would do much for 
the cause of the wage-earner for the reasons 
elsewhere referred to. It was the declared 
purpose of William I, the German Emperor, 

1 S. & B. Webb, Industrial Democracy, ii, 529, 531. 



EXISTING INSTITUTIONS 119 

in urging Bismarck's plan upon the German 
Reichstag, to promote the welfare of the work- 
ing classes, and after a trial of twenty-five 
years his hopes as to the efficacy of the scheme 
have been fully realized. In this view the So- 
cial-Democratic party in Germany fully concur. 
There has been a growing conviction among 
all classes of the German people, as expressed 
by a competent authority, that "the tasks of 
social improvement fulfilled by the German 
workmen's insurance can neither be accom- 
plished by a development of voluntary self- 
help, nor by an improved legislation on the 
employer's liability, nor by voluntary insur- 
ance." * These significant words are indorsed 
by many economists the world over and are 
entitled to the thoughtful consideration of 
every wage-earner and of all interested in his 
welfare. 

Somewhere between friendly societies and 
the mutual-benefit side of trade-unions must 
rank the various forms of brotherhoods, frater- 
nal and similar associations in this and other 
countries. The criticisms to which friendly so- 
cieties are subject apply a fortiori to all such 
organizations. Their instability, the lack of 
persistence on the part of their members, and 
their general disregard of scientific bases of 
computation, render them simply unworthy 

1 L. Lass, in German Workmen?* Insurance, pt. 1, p. 30. 



120 STATE INSURANCE 

of consideration in connection with a broad 
and general scheme of insurance. 

The relief departments of large corporations 
or other employers belong to a distinct class. 
They owe their origin possibly to the very 
successful operation of such a department in 
the Krupp Works at Essen, established in 
1853, which in turn was probably suggested 
by the miners' associations elsewhere re- 
ferred to. They vary much in their manage- 
ment and purposes. Generally speaking, they 
aim to furnish surgical aid, pay during dis- 
ability resulting from accidents, sick-pay, su- 
perannuation allowances, and death benefits. 
In some of these, as in the department of the 
Baltimore and Ohio Railroad, membership 
is compulsory ; this was the case at Krupp's 
even before the compulsory insurance law; 1 
in others (as the Pennsylvania Railroad) , and 
more commonly, it is voluntary. In some of 
them the workmen are represented on the ex- 
ecutory or advisory boards or committees, but 
only as a minority ; the employer retains con- 
trol. In so far as the employer retains control, 
supplies deficiencies in the fund, assumes all 
expenses of management, holds and manages 
all trust funds and holds himself responsible 
for them, and invites contributions to such 

1 P. P. J. Krupp, Acierie de M. Krupp a Essen. Statuts, 1855, 
sec. 2, p. 9. 



EXISTING INSTITUTIONS 121 

fund from the outside, there would seem to 
be a distinctly paternal, not to say charitable, 
quality in such relief departments. 1 An of- 
ficial of one of these entitled his address 
upon this subject on one occasion: "What 
the Pennsylvania Railroad Company is doing 
for the benefit of its Employees." 2 Probably 
there will usually be found somewhere in 
connection with the plan a distinct admoni- 
tion that the department is not self-supporting. 
Perhaps this very fact appeals to the more 
tractable class of workmen ; they may comfort 
themselves with the theory that this is an in- 
direct acknowledgment that there is a residue 
of obligation due them from the corporation 
or the public, which is thus adjusted. The 
more captious question the altruistic motives 
of the employer and sometimes suspect that 
these measures are designed to attach em- 
ployees more strongly and thus weaken their 
own organizations. The compulsory feature 
has not met with favor among workmen, but 
it would seem obvious that the best results 
could be gained if the membership were made 
obligatory upon all. 

These relief departments have been un- 
doubtedly of very great value in relieving 
distress and in promoting thrift and good 

1 Regulations, Penn. R. R. Relief Dept. 1906, pp. 14, 19. 
3 M. Riebenach, before the Economic Club, Boston. 



122 STATE INSURANCE 

feeling between employees and employers; 
they have had, too, a moral effect beyond their 
most direct results ; they reach, however, even 
in the case of the railways of the country, 
only a small portion of the roads and em- 
ployees. In 1904 the railroad relief depart- 
ments extended to only about one fifth of the 
roads and one sixth of all employees. 1 

Furthermore, to the economist who looks 
for the ultimate assumption of all such in- 
surance by the state, these institutions seem 
to be merely a step in the evolution of govern- 
ment insurance ; they seem merely to demon- 
strate in miniature what might be done on a 
larger scale. What the corporation has done 
fairly well the state might do far more effect- 
ively through its larger powers. If insurance 
compulsory upon all employees of a given rail- 
road has proved practical and highly beneficial, 
that fact suggests at least the practicability of 
insurance of all workmen through compulsion 
exercised by the state. 

It is claimed by its advocates that indus- 
trial insurance, so called, supplies to a large 
extent what other institutions lack in pro- 
vision for the needs of the workmen whose 
wages are low. It has been urged quite plaus- 
ibly that these industrial insurance companies 

1 M. Riebenach, Address before National Civic Federation, New 
York, 1904. 



EXISTING INSTITUTIONS 123 

are highly beneficent social institutions. 1 But 
in this view disinterested economists who 
have thoroughly studied the question do not 
concur. One of them well says: "That this 
form of insurance is permitted with all its 
abuses and deceptions is strong proof that the 
principles of Spencerian individualism still 
dominate this country." 2 The same writer 
expresses the opinion of all intelligent observ- 
ers who are disinterested, in characterizing 
such insurance as little better than robbery 
under the forms of law, and an exploitation s/ 
of the poorest and neediest, whose insurance 
costs them two or three times as much as 
the prosperous man pays for the same insur- 
ance. 3 The enormous expense of management 
of an industrial insurance company, with its 
army of solicitors and collectors, is undoubted- 
ly an inseparable incident, and that fact alone 
indicates that there is something essentially 
wrong with the system. But the victim of such 
insurance does not stop with contributing to 
the necessary expenses, enormous as they 
may be. A Royal Commission appointed to 
investigate friendly societies in Great Britain 
reported that among the collecting societies 

1 John F. Dryden, The Social Economy of Industrial Insurance. 

2 I. M. Rubinow, in Journal of Political Economy, xii, 380. 

8 See, also, "Q. P." How to Buy Life Insurance, p. 71, and L. D. 
Brandeis, Address before Twentieth Century Club, Boston, October, 
1906. 



124 STATE INSURANCE 

— whose machinery and methods most nearly 
resemble those of industrial insurance com- 
panies — it found a tendency on the part of 
the managers to forget that they were simply 
trustees and to look upon the concern as their 
own personal property. So in this country the 
insured finds himself not only paying legiti- 
mate expenses, but contributing to enormous 
dividends to stockholders and apparently to 
dividends to more highly favored insurers in 
the same company. A flagrant instance of 
such dividends to stockholders has often been 
cited, where upon an original investment of 
$1000 there is an annual return of $2200. 1 
The percentage of withdrawals from such 
companies — often exceeding ninety per cent 

— is of great significance. The apologists 
for such insurance flippantly tell us that it is 
only the thriftless that withdraw, seeming to 
forget that it is not intended for well-to-do 
and prosperous people. But it certainly is 
not evidence of thrift that men should pay for 
anything two or three times what it is worth, 
and an analysis of withdrawals would prob- 
ably disclose the fact that a large portion of 
them come from those who have been over- 
persuaded to attempt to carry a burden en- 
tirely out of proportion to the benefit which 

1 Massachusetts Insurance Commissioner, Forty-Eighth Annual 
Report, p. xxviii. 



EXISTING INSTITUTIONS 125 

can result. It is not the most thrifty and sa- 
gacious man "who earneth wages to put into 
a bag with holes." * 

The idea involved in assessment insurance 
has been at the basis of the oldest insurance 
known, and superficially considered it might 
be deemed essentially the best of all. It has 
come to be associated largely with fraternal 
organizations and secret societies. While 
theoretically sound in principle, such insti- 
tutions are never likely to prove stable unless 
there is some other bond than the mere busi- 
ness relation of members. The most obvious 
difficulty in the way of their stability is the 
fact that, if their rates are adjusted scientific- 
ally and upon established bases of mortality, 
the member finds himself, with advancing 
years and diminishing earning capacity, liable 
to an assessment two, three, and four times 
as large as that with which he began. 

There remain to be considered the old-line 
insurance companies, so called. These are of 
comparatively recent origin, having grown 
up within the past seventy-five years. Their 
remarkable growth and development are of 
great social and financial significance. So far 
as they have been conducted intelligently and 
with due regard to the interests of the insured, 
they have rendered a service of incalculable 

1 Haggai, i, 6. 



126 STATE INSURANCE 

value, and their beneficence has been gener- 
ally recognized. But in the very nature of the 
case life insurance offers great temptations to 
unscrupulous managers, attractive oppor- 
tunities for perverting a sacred trusteeship to 
serve selfish and personal ends. That the in- 
herent tendency has been in some degree neu- 
tralized has been largely due to the efforts of 
one man and to the legislation resulting from 
his advocacy. How strenuously and per- 
sistently Elizur Wright labored in the interest 
of honest life insurance has been graphically 
related. 1 

But in spite of the vigilance of such men, 
and of stringent legislation, there has been 
gross mismanagement and on a colossal scale. 
The revelation of the corruption and reckless- 
ness which has attended the management of 
some of the largest companies is too recent 
and too well known to require repetition. 
The story of greed, fraud, and betrayal of trust 
is appalling. Such evils spread with so deadly 
and so rapid a contagion that if the revelation 
had been long postponed it may well be sur- 
mised that the whole system of life insurance 
would have been wrecked ; at least, the pub- 
lic confidence, which is absolutely essential, 
already seriously impaired, would have been 
destroyed. It would be well to remember that 

1 B. J. Hendricks, in McClure's, xxvii, 157. 



EXISTING INSTITUTIONS 127 

the investigations disclosed not merely a dis- 
ease but a definite tendency towards disease. 
The course of the disease is arrested for the 
moment, but its reappearance only awaits an- 
other condition of public apathy, the too rapid 
subsidence of a righteous public indignation, 
and the relaxation of effective vigilance. 

These recent investigations reveal certain 
insidious evils and tendencies which are in- 
herent in the system of life insurance as now 
conducted. The lack of accountability in 
managing immense trust funds is not con- 
ducive to a high degree of fidelity on the part 
of managers, and the fact that the statistical 
features of the business are not easily com- 
prehended without some actuarial training 
renders the policy-holder — as compared with 
a savings-bank depositor, for example — quite 
powerless to call his company to account. 

But aside from these more subtle and in- 
sidious dangers to which life insurance in its 
present form is necessarily subject, there are 
certain obvious defects and limitations which 
make it far from an ideal institution. Success 
and stability must depend, more than in any 
other business, largely upon the capacity and 
fidelity of its managers. We have to-day in 
this country forty companies more or less 
prominently before the public; we have per- 
haps twenty that can be quite unreservedly 



128 STATE INSURANCE 

commended. But we do not realize that these 
companies are the residue of a great host that 
have come and gone, the survivals only a 
small fraction of the total. Therefore we 
cannot maintain very confidently that a life 
insurance company is inherently a stable in- 
stitution. 

The question of economy must also be met, 
the inevitable comparison of cost with result. 
Does life insurance cost too much? Is there 
something radically defective in the mechan- 
ism of its management which necessarily 
leads to extravagance or waste ? In industrial 
affairs we estimate carefully the cost and ef- 
ficiency of expensive machinery. Is there not 
the same necessity in life insurance ? A gen- 
eration ago Elizur Wright declared that the 
cost of solicitation and the general expenses 
of life insurance made it practically prohibit- 
ive for those most needing it ; that they " could 
not afford the luxury of the agency expenses 
of existing systems." But he placed the cost of 
solicitation at only from six to ten per cent 
of all the premiums, and the expenses of man- 
agement at seventeen per cent of the entire 
premiums for the year. 1 Since that time the 
cost of solicitation has greatly increased, and 
the expenses have risen from seventeen to 

1 Report of Com. of Boston Board of Trade, 1874, pp. 4 and 20; 
Circular, 1876, calling for subscriptions for American Family Bank. 



EXISTING INSTITUTIONS 129 

twenty-five per cent. 1 The commissions of 
agents for the year 1904 in twenty-five leading 
companies exceeded the amount of new pre- 
miums. 2 In the thirty- three companies given 
in the Massachusetts report this item made an 
aggregate of about $80,000,000, more than one 
fifth of the entire disbursements of the year, in- 
cluding payments to policy-holders ; and with 
other expenses, not including taxes, making 
more than one third of such disbursements. 3 

No one would maintain that this service, 
costing the policy-holders of this country for 
the year 1904 $114,000,000, is productive 
labor of a high degree of efficiency; there is 
somehow waste or extravagance, or both, of 
appalling magnitude. 

The policy-holder not only pays for the 
services of the agent who effects the insurance 
upon his life ; he pays for time wasted by other 
agents upon him, even for time wasted by 
agents upon the much solicited individual 
who never insures. In other words, there 
is most wasteful reduplication of effort. He 
pays, too, something towards princely salaries, 
offices extravagantly equipped and expensively 

1 B. F. Brown, Book of Life Insurance Economics, Table IV. 
The figures of 1904 are taken as perhaps indicating average and 
normal conditions rather than those since the New York insurance 
investigations. 

2 Compare Brown, op. cit. Table III, with Fiftieth Report of Mass- 
achusetts Insurance Commissioner, Table C. 

3 Report of Massachusetts Insurance Commissioner, 1904, Table C. 



130 STATE INSURANCE 

managed ; he contributes to funds for the un- 
lawful enrichment of individuals, for corrupt- 
ing legislatures, and for influencing political 
campaigns. 

From the social point of view there is an- 
other aspect of the subject which must be 
considered: the probable persistence of the 
policy-holder. The figures bearing upon this 
point are very significant. In the thirty-three 
companies referred to, of the policies ter- 
minated during the year 1904 about forty- 
two per cent terminated by lapse and sur- 
render, over thirty per cent by lapse. The 
showing of industrial companies is very much 
worse ; in seven companies given in the Massa- 
chusetts report almost nineteen twentieths 
terminated by lapse and surrender, over nine 
tenths by lapse. To state the matter more 
graphically, while in these industrial com- 
panies $24,000,000 terminated by death, 
$19,000,000 terminated by surrender, and 
$390,000,000 by lapse I 1 Yet from such figures 
as these does the president of one of these 
companies doing the largest business in that 
line find evidence of thrift and social economy ! 

There has been much discussion recently 
of savings-bank and over-the-counter insur- 
ance. It is too early to measure the effects of 

1 Fiftieth Annual Report of Massachusetts Insurance Commis- 
sioner, Tables D and F. 



EXISTING INSTITUTIONS 131 

the discussion or the resulting legislation. 
Movements in this direction are significant 
as furnishing evidence of an awakening to an 
urgent social need and a recognition of the 
wastefulness and inadequacy of existing in- 
stitutions. The agitation is not new. The 
great apostle of life insurance in the interests 
of the policy-holder, Elizur Wright, advo- 
cated a scheme aiming to combine in one in- 
stitution the functions of life insurance and 
savings banks, under which the expense of 
solicitation was to be entirely eliminated, 
and he secured the requisite permissive legis- 
lation in a charter for the American Family 
Bank. 1 Although the evils which he clearly 
recognized have greatly increased and have 
fully justified his apprehensions, it is doubt- 
ful whether others will succeed, in a reform of 
this nature, where he failed. 

In surveying the whole field, then, in con- 
sidering the nature of insurance, the urgent 
social need, especially on the part of those 
who rely upon their daily earnings to supply 
their daily wants, of making provision for the 
vicissitudes of life, — such provision as will 
bring to them some greater degree of content- 
ment and some sense of security for to-morrow 
as well as for to-day, — we find a heterogeneous 
group of agencies seeking to accomplish the 

1 Massachusetts Laws, 1876, ch. 142, and 1877, ch. 152. 



132 STATE INSURANCE 

end desired. By their aims they point unerr- 
ingly to a universal social necessity — to the 
fact that the individual can accomplish, 
through some form of insurance, what he 
cannot accomplish alone. In this field at least 
we admit the advantage of collective over 
individual effort. 

But while existing institutions furnish con- 
clusive evidence of the need, a study of them 
discloses the fact that no one of them nor all of 
them combined are adequate or even appro- 
priate for the satisfaction of the need. While 
some of them might, by slight modifications, 
furnish the various kinds of insurance that 
have been referred to, — insurance against 
accident, death, sickness, old age, and invalid- 
ity, — they can do so only through methods 
which are costly, wasteful, and unscientific. 
They have to some extent stimulated thrift, 
especially among the thrifty; to some extent 
they have discouraged thrift, especially among 
the thriftless ; at least, for the past fifty years, 
through their advocates and their armies of 
solicitors, they have done much towards edu- 
cating the public upon the subject of insurance, 
so that there are few to-day in intelligent com- 
munities who do not admit its usefulness and 
beneficence when properly administered. It 
is patent to all observers that it must furnish 
in the future in increasing degree a bulwark 



EXISTING INSTITUTIONS 133 

against that poverty which comes upon the 
propertyless through accidents, sickness, or 
other sudden misfortune ; that it must in some 
way be made to reach those who do not make 
other provision for the future and its vicissi- 
tudes. 

We must not be misled or dazzled by the 
stupendous figures which show the totals of 
insurance carried, cited often as conclusive 
evidence of a nation's prosperity. These 
figures are much swollen by the insurance of 
well-to-do people who least need it and in 
many cases would better be without it; they 
furnish no indication of an increasing thrift 
or prosperity among the poor and the needy. 
Besides, such vast sums suggest perils as well 
as benefits ; their possession and control seem 
to lead, as shown by recent investigations, 
irresistibly towards greed, recklessness, cor- 
ruption, and general maladministration. It 
is not pessimistic to suggest, in the light of 
recent events, that at the rate of increase 
of the past fifty years the directors — by no 
means the policy-holders — of a few great 
insurance companies might at no distant date 
control and dictate the financial policies of 
the nation, — a power too great to be intrusted 
to any private organizations. 

The enlightened state is to-day ready for 
something better than existing institutions. 



134 STATE INSURANCE 

A great nation has furnished a brilliant ex- 
ample for our study and guidance. Under the 
inspiration of that example the world seems 
to be moving toward the solution of one of its 
greatest and most difficult problems. 



VII 

INCIDENCE 

Under a system of compulsory insurance for 
workmen such as prevails in Germany and 
some other countries, upon whom does the 
burden fall ? Upon whom ought it to fall as a 
matter of justice ? The German law provides 
that it shall be distributed ; in sickness insur- 
ance one third must be paid by the employer 
and two thirds by the workman; in accident 
insurance the whole must be paid by the em- 
ployer; and in invalidity insurance a sub- 
sidy is paid by the state and the balance in 
equal shares by the employers and the work- 
men. Perhaps it would not be claimed that 
this distribution of the burden was strictly 
scientific; there was the necessity for com- 
promise between diverse views; in accident 
insurance it was doubtless felt that the em- 
ployer was in a position to charge the cost to 
the industry and recover it in a higher price 
to consumers, although this reasoning might 
be almost equally applicable to other kinds 
of insurance, even if not quite so obviously 
sound. 

In the discussion of the question of the in- 
cidence of burdens there is often much con- 



136 STATE INSURANCE 

fusion of thought. Who pays taxes, direct and 
indirect ? It is usually assumed that the ques- 
tion is very simple : that the landlord pays the 
tax and not the tenant ; the employer and not 
the employee; in a word, the one who me- 
chanically turns the fund over to the public 
treasury. Nothing could be simpler in the 
way of a solution. For example, in a recent 
public document issued for the purpose of 
furnishing valuable information one may find 
it carefully computed that the proper tax of 
a family of eight in a certain city would be 
$645.44 per annum, while the head of the 
family pays only a poll-tax of two dollars. The 
writer naively asks, "How, on the supposed in- 
come of $600, can enough be charged against 
him to pay a tax of $645.44?" He adds 
that such a person " is, in reality, a pensioner 
and a recipient of benefits paid for by persons 
who are taxed." This would seem to be the 
echo of an old political economist : "The poor 
do not, never have, and never can pay any 
tax whatever. A man that has nothing can 
pay nothing." ' The farm laborer sometimes 
in the dull season works for a nominal wage, 
say five dollars per month and board. It might 
be argued that as his board is worth at least 
fifteen dollars a month he is a pensioner, as 

1 F. F. Fauquier, quoted in Seligman, Incidence of Taxation, p. 
17. 



INCIDENCE 137 

he cannot pay the value of his board out of his 
wages. 

As a matter of fact, it is immaterial who 
manually pays a tax. We can imagine a com- 
munity where it would be the custom for the 
tenant to pay it rather than the landlord ; the 
workman rather than the employer. Taxes 
are not paid, as a gratuity, out of some mys- 
terious fund. They must trace their ultimate 
source to the product of labor. The question 
would be simplified if we look upon wages, 
when equitably adjusted, as a residue, after 
the payment of rent, taxes, interest, and 
similar charges have been deducted. 

Some such general considerations should 
be borne in mind when we discuss the in- 
cidence of charges for workmen's insurance. 
The burden does not necessarily by any means 
fall upon the one who actually makes the pay- 
ment. 

There are three parties upon whom the 
cost of such insurance may be levied: the 
state, the employer, and the workman. It is 
sometimes loosely argued that upon which- 
ever of these parties the assessment falls it 
virtually comes to the same thing — a tax 
upon the consumer. This view is superficial 
and fallacious, as will be shown. 

At first sight it might seem appropriate that 
the state should take upon itself the whole 



138 STATE INSURANCE 

burden, granting compensation in case of acci- 
dents, sickness, and invalidity alike. It would 
be a natural transition from the support of the 
so-called worthy poor as now administered to 
the payment of specific amounts to the unfor- 
tunate soldiers of industry. The tax would be 
levied upon society as it is to-day. The objec- 
tions are economic as well as moral and senti- 
mental : there would be the same tendency to 
pauperize men as there is under the present 
poor-law ; the state would be held out as a great 
benefactor of inexhaustible resources; there 
would be the greatest inducement to simula- 
tion of sickness and incapacity ; it would bring 
in the evils of the soup-kitchen on a large 
scale. For these reasons the cost would be 
excessive and the evils would be cumulative. 
By this method, too, the nature and the 
amount of the burden would be effectively 
disguised; the real cost of an industry could 
not be identified or made known; the party 
reaping the profit of the industry might escape 
its losses ; the state would say to conscienceless 
promoters of industry, if there are such, Be as 
reckless as you may with the human material 
committed to your charge, maim with your 
dangerous machinery, poison with noxious 
gases and unsanitary surroundings, incapac- 
itate as you may, even assail the future of 
the race by pitiless disregard of maternity and 



INCIDENCE 139 

childhood, — it shall cost you nothing except 
as you contribute to taxes largely paid by 
others ; swell your profits and dividends, un- 
mindful of the fact that a considerable per- 
centage of your so-called earnings are virtu- 
ally disguised in poor-rates. 

But perhaps the most serious objection to 
the state's subsidy is ethical : As long as the 
state, by whatever method, carries the burden, 
it will inevitably be looked upon as a gratuity 
and the recipient will wear a badge of disgrace 
both in his own estimation and in that of his 
fellows ; however stoutly it may be maintained 
that he is not a pauper, that he is simply 
receiving a delayed reward for his labors, we 
cannot overcome the current of thought that 
has been running for centuries. 

There is something to be said in favor of 
imposing this burden upon employers or, in 
other words, upon industry. It may then still 
appear in the higher cost of goods or service. 
This would not necessarily mean a higher 
price for consumers, as is usually assumed. 
More correctly stated, it would perhaps result 
in either a diminution of profits or a higher 
price. If prices are already as high as the 
market permits, it might come out of profits; 
if profits are already as low as possible, con- 
sidering the future maintenance of the indus- 
try, there would arise a commercial disad- 



140 STATE INSURANCE 

vantage in the competition with other nations 
possibly. Possibly rather than probably, be- 
cause it is not to be assumed that nations are 
not to be rivals in social legislation that bene- 
fits its workmen as well as in the products of 
their manufactories. We should expect this 
rivalry as a matter of theory, but we find that 
it exists as a matter of fact. Germany's social 
legislation in the eighties almost instantly 
aroused all of Europe, and there were irresist- 
ible demands for such legislation in many 
other countries. 

But at the worst, if profits are at a minimum 
and prices are at a maximum which cannot be 
passed, we simply have a demonstration that 
that particular industry is unprofitable — in 
some measure parasitic. As between the em- 
ployer and the state this situation furnishes no 
reason why the state should assume the bur- 
den of insuring the workmen, no advantage in 
disguising the facts. If the industry is prose- 
cuted at a loss the state might as well pay the 
loss, when ascertained, in a direct subsidy as 
to pay it indirectly. There would be great ad- 
vantage in knowing just how far the industry 
was a burden upon other industries ; to what 
extent it was a recipient of public aid, to what 
extent it was itself a pauper. If it is, tested 
by essential results, a pauper, nothing can be 
more odious than that it should at the same 



INCIDENCE 141 

time be paying large dividends from fictitious 
earnings. Essentially that industry may be 
deemed a pauper which exhausts the fifty 
years of a workman's industrial life in twenty 
years or fifteen or ten, as has not infrequently 
been the case, and leaves the remnant, the 
wreck, to the care of society. 

Payment of insurance charges by the indi- 
vidual remains to be considered. Why should 
not the workman himself pay them? Why 
should he not care for his future and provide 
for its emergencies? Does he not in reality 
bear this burden, whatever the method em- 
ployed, since the charge must come out of 
the product of labor ? Does it not constitute 
a portion of his just wages ? Assuming that a 
man's support for his whole life, for the pro- 
ductive portion and the waste alike, is to come 
out of the product of his labor, why should we 
distinguish the two ? Figures indicate that, as 
an average, about six per cent of a man's pro- 
ductive years is lost through sickness ; * he 
loses a less definite percentage, varying with 
the kind of employment, through accidents; 
certain amount through old age and invalidity. 
The amount of the loss from these sources is 
determinable by actuarial calculations. Being 
determinable, why should not the provident 
workman anticipate it; why should not the 

1 See p. 5, ante. 



142 STATE INSURANCE 

improvident workman be compelled to do 
so? 

Assuming that, for the vast majority of 
workmen, the present rate of wages is only suf- 
ficient to meet his daily needs while his work- 
ing capacity is unimpaired, — an assumption 
to which those who have studied the question 
would generally assent, — to require them to 
pay insurance charges would necessitate an 
increase in the rate of wages or a further lower- 
ing in the standard of living. An increase in 
the rate of wages might result in the diminu- 
tion of profits or in a higher price for the pro- 
duct or the service. 

Of course what has been said about the in- 
creased cost of product or service necessitated 
by insurance charges and the resulting dis- 
advantage in competition would not apply to 
public service corporations. That a railroad, 
for example, should pay, either in higher 
wages or in some other form, the cost of the 
human material which it uses, is a proposition 
too axiomatic to merit discussion to-day, how- 
ever it may have seemed sixty years ago. 
Practically this fact is recognized in the estab- 
lishment of relief departments by the great 
railroad corporations of this country. 

We must consider, too, in this connection 
the possibility of increased efficiency under a 
system of compulsory insurance made univers- 



INCIDENCE 143 

ally operative. At first sight the claim or sug- 
gestion that efficiency could be so increased 
might seem fanciful and visionary, but for- 
tunately the demonstration is at hand in the 
experience of Germany. The results in this 
respect were confidently predicted in the out- 
set by those who looked beneath the mere 
surface of economic phenomena. Their hope- 
ful view prevailed over the predictions of dire 
commercial and industrial disaster. Their 
expectation of superior efficiency was merely a 
recognition of the distinct value to society of 
the conservation of industrial energy; of the 
fact that sickness, accidents, incapacity for 
labor, so far as they are preventable, are signs 
of industrial waste. The prudent husbandman 
finds it profitable to keep his beast of burden 
in working condition by proper housing, feed- 
ing, and care ; society cannot afford to be less 
prudent in its care for the workman. To pro- 
vide for medical and surgical aid, for hospi- 
tals and sanatoria, is not inconsistent with cold, 
calculating thrift so long as they contribute to 
higher efficiency. Beyond all of these material 
considerations, who will place a value in 
terms of efficiency upon the contentment that 
must come with a wise and ample provision 
for the future? 

A common fallacy in connection with the 
cost and incidence of insurance charges should 



144 STATE INSURANCE 

be noted : It is said that if these charges, how- 
ever the incidence may be adjusted, result in 
a higher cost of production, it will react upon 
the workman in an increased cost of living. 
But it must be remembered that the workman 
is not a consumer to the same extent that he is 
a producer. It has been authoritatively stated 
that one fourth of the people of the United 
States consume two thirds of its income and 
that of the other three fourths, two fifths con- 
sume more than the remaining three fifths ; in 
other words, two fifths of the total population, 
comprising perhaps the majority of workmen, 
do not consume per capita more than one 
eighth or one tenth as much as the richer one 
fourth. 1 Obviously the workman may not suf- 
fer as much from an increase in prices as he 
gains by the higher rate of wages which con- 
tributes to higher prices. 

The claim that it is immaterial where the 
incidence of insurance charges falls will not 
bear scrutiny. Public policy in all such mat- 
ters should conform to economic facts and not 
be based upon fictions. If dependence, in 
cases of industrial misfortunes, were the result 
of intemperance or improvidence; if it in- 
dicated that wages, ample or excessive, had 
been ruthlessly squandered ; if this dependence 
could be attributed justly to the fault or even 

1 C. B. Spahr, Distribution of Wealth, pp. 128, 129. 



INCIDENCE 145 

the folly of the victim ; if society in its indus- 
trial adjustments had done its full duty by 
him, — possibly there might be righteous and 
wholesome discipline and warning in visiting 
upon him the contempt and odium which the 
public dependent is made to feel. But we do 
not believe this to be the case even in the ma- 
jority of instances. Why, then, should we pre- 
serve in industrial bargaining, in the forms of 
law, in social usages, and in current thought, 
these absurd fictions ? If insurance is the 
rational method (and no other has yet been 
devised) by which the workman should make 
provision for sickness, accidents, invalidity, 
and old age, for the widow and the orphan, 
— in other words, the method whereby he 
may assume all of his own burdens, — and 
if the protection of insurance is his right as 
well as his duty, why should not he himself 
pay the cost ? Why should not his wages be 
made sufficient, if not already sufficient, to 
enable him to meet this charge ? Why should 
he receive as a suppliant what is his of right ? 
Why should he accept as the dole of conde- 
scending charity a portion of his just wages ? 
Why should it be represented to him by con- 
stant iteration that society or his employer is 
paying the cost of his insurance, since it must 
ultimately come out of the product of his 
own toil ? 



146 STATE INSURANCE 

It is better that the state should not be 
looked upon as a bounteous and indiscrimin- 
ate giver; that the employer should not be 
exalted above his employee on account of sup- 
posed benefactions which are merely appar- 
ent; that there should be cultivated in the 
workman a sense of dignity rather than of 
servility; of manliness, self-reliance, and thrift 
rather than of dependence. 

No statistician can now tell us, approx- 
imately even, what it costs to care for the 
wrecks of industry, the maimed, the sick, the 
infirm, the aged, the widow, and the orphan ; 
nor can any one have a definite conception as 
to the incidence of the burden. But the cost of 
insuring against the vicissitudes of life can be 
actuarially determined and with increasing 
precision as data accumulate under a scientific 
system. As to a given industry we may know, 
with some approach to accuracy, what that 
industry costs in addition to the labor cost as 
now understood, in accidents, in sickness, in 
shortening the industrial life of men or im- 
pairing their capacity for work. 

If it is true to-day that a large percentage 
of workmen are receiving a bare living wage 
based upon the working days and years of life, 
this actuarial determination of the cost of 
insurance would disclose just how much they 
lack of a real living wage ; it would reveal, as 



INCIDENCE 147 

though by a chemical or other scientific test, 
a radical defect in the present basis of wages. 

Our conclusion, then, is that the cost of 
workmen's insurance should fall upon work- 
men and should distinctly come out of their 
wages; that such an arrangement would 
accord with essential facts, and that there 
could be no gain through any disguise or indi- 
rection ; that it would necessarily lead to a re- 
adjustment of wages wherever inadequate to 
conform to the requirements of a real living 
wage, a living wage based upon the whole life 
and not upon a fraction, to include the waste 
as well as the productive portion. 

While any rational system of workmen's 
insurance ought to bring courage, hope, and 
contentment to the wage-earner, the payment 
of the cost out of his own wages, the realiza- 
tion that it is his own provision for his own 
future would surely inspire him with a higher 
spirit of manliness, of thrift, and of self-reli- 
ance. 



VIII 

OLD-AGE PENSIONS 

There is said to prevail among certain bar- 
barous tribes a simple but summary method 
of dealing with the aged poor: A council is 
called, and if the person under consideration 
is found to have reached a certain stage of de- 
crepitude and dependence a feast is held in his 
honor, he bids his friends a last farewell and 
submits to the penalty of death. The victim 
cheerfully acquiesces in the decision that he 
ought not longer to incumber the earth. This 
would seem to be a very humane custom com- 
pared with that of most civilized nations, 
where the aged pauper, physically exhausted, 
destitute, friendless, forsaken, drags out a 
miserable existence in the workhouse or as the 
recipient of some humiliating form of poor- 
relief. The pathos of the situation is height- 
ened when it happens that the unfortunate one 
is a veritable soldier of toil, worn out on in- 
dustrial battlefields, perhaps after fifty years 
of ill-requited labor. His misery is sometimes 
emphasized by his conviction that an unde- 
fined portion of the material prosperity that 
surrounds him is rightfully his ; that the com- 
munity in which he lives and perhaps the fel- 



OLD-AGE PENSIONS 149 

low citizen who looks upon him with mingled 
aversion and pity have unduly profited by his 
toil. 

There has always been a theory, persistent 
and widely prevalent, that the aged pauper 
has reached his condition through his own 
fault, through intemperance or some kindred 
vice, or at least through thriftlessness or ex- 
travagance. Not infrequently the self-compla- 
cent citizen who has profited possibly by the 
very industrial conditions which contribute to 
pauperism seems to discern in its evils signs of 
a wholesome retributive justice. 

But there is a growing tendency to discrim- 
inate ; statistics have been patiently gathered 
and marshaled and they tend to show that a 
very large percentage of old-age pauperism 
arises from misfortune rather than fault. It is 
idle to talk of thrift and saving without regard 
to the adequacy of wages. In the debate upon 
the old-age pension act in New Zealand one of 
the speakers indignantly exclaimed: "Thrift 
out of four shillings a day ! with perhaps eight 
or nine mouths to feed, clothes to find, boots for 
their feet and books for their school !" ' But a 
majority of the wage-earners of Great Britain 
do not get more than four shillings a day, and 
for a large class in the United States conditions 
are no better. The grotesqueness of the claim 

1 H. D. Lloyd, Newest England, p. 343. 



150 STATE INSURANCE 

that such men ought to save against old age is 
coming to be realized. In the more recent dis- 
cussions of old-age relief we hear more of doing 
justice and less of bestowing charity. The 
preamble to the old-age pension act in New 
Zealand recites that it is equitable that those 
who, in the prime of life, helped to bear the 
public burdens of the Colony and to open up 
its resources should receive pensions, and in 
the debate in the British Parliament upon the 
recent old-age pension act, the Chancellor of 
the Exchequer said, in reply to the demand for 
a contributory plan : "The workman who has 
contributed health, strength, vigor, and skill to 
the building-up of the wealth of the nation has 
made his contribution." ' 

At least we are learning to make distinc- 
tions, and we speak of the deserving poor. 
The deserving poor ! Why deserving ? and of 
what? and from whom? 

The question of civil pensions seems to take 
its earlier and more definite form as related to 
public servants. It is singular, if we reflect, 
that the public servant — the envy of his fel- 
lows, who eagerly secures a position where his 
services are usually less onerous and better paid 
than similar service under a private employer, 
who is practically guaranteed employment for 
a long period of service and without deduc- 

1 London Times, June 16, 1908, p. 5. 



OLD-AGE PENSIONS 151 

tions for enforced idleness, and who is fre- 
quently retained at a time of life when he 
would be replaced by a new recruit in private 
employment — that this highly favored indi- 
vidual should be the peculiar object of the 
philanthropist's regard. The public employee, 
school-teacher, clerk, bookkeeper, stenograph- 
er, whatever he may be, has far stronger in- 
ducements towards thrift and far less excuse 
for improvidence than the wage-earner in a 
similar class who cannot know what his earn- 
ings may be or what deductions must be made 
for unemployment. When the comparison is 
made with the lower classes of wage-earners it 
becomes still more significant. 

The sentiment in favor of pensions to pub- 
lic servants, if analyzed, justifies itself on the 
assumption that they have been insufficiently 
rewarded, that something has been withheld 
which belonged to them, and that the state or 
municipality should make amends ; or, if there 
is to be a contributory scheme, the state, dis- 
trusting the thrift and providence of its em- 
ployees, constitutes itself a guardian to make 
provision for the future. But if there is any 
such reasonable presumption of inadequate 
compensation in favor of the public servant, 
how would the case stand as to the ordinary 
wage-earner who gets less for a similar serv- 
ice. Has the state a lower degree of respons- 



152 STATE INSURANCE 

ibility for an industrial system which results 
in inadequate wages than for withholding such 
wages from its public servants ? Should the 
public show less solicitude for the great mass 
of wage-earners, upon whom its prosperity 
fundamentally depends, than for a small num- 
ber of its immediate employees ? If it owes a 
residue of obligation to the latter in old age, 
does it not a fortiori owe it to the former ? If 
it may fittingly take the latter under guardian- 
ship in a contributory plan, should it not a 
fortiori the former? 

The discussion of the subject of relief for the 
aged poor in its strictly economic and scienti- 
fic aspects is recent, although their condition 
has always excited attention and sympathy 
wherever observed among civilized people. 
But the idea that they had a right to relief 
has not as a rule entered men's minds, or, if 
suggested, has been stoutly denied. If they 
applied for aid it must be in the attitude of 
suppliants seeking charity; any suggestion 
that there had been wrongs or injustice which 
should be righted would have been resented. 

A brief sketch of the subject historically 
considered may not be out of place. 1 

The government projects in England nearly 

1 See J. F. Wilkinson, Pensions and Pauperism, pp. 7-33 ; also as 
to plans in Great Britain, H. H. Asquith, Speech on the Budget, 
London Times, May 8, 1908, p. 11. 



OLD-AGE PENSIONS 153 

two hundred years ago, and in Holland much 
earlier, to provide for deferred annuities have 
no relation to the present discussion, as the 
purpose was fiscal rather than economic — to 
meet the urgent need of the government for 
funds and not the future needs of pensioners. 
But as early as 1773 a plan for old-age pen- 
sions was advocated by Edmund Burke and 
passed the House of Commons ; a little later, 
in 1793, a scheme was devised by Thomas 
Paine which he hoped might become interna- 
tional in its scope. The agitation in Germany 
in the seventies may be looked upon as the 
immediate stimulus to the more recent discus- 
sion. In Germany the provision for superan- 
nuation became a part of the great system of 
compulsory insurance for workmen. In Eng- 
land the scheme of Canon Blackley, doubtless 
suggested by the movement already taking 
shape in Germany, and his earnest advocacy 
of it, commanded attention. 1 His plan was 
urged upon the House of Lords by the Earl 
of Carnarvon, 2 and in a modified form was 
advocated by Chamberlain. 3 Later exhaust- 
ive inquiries were made and data gathered 
by parliamentary committees and by a royal 
commission. 4 

1 W. L. Blackley, " National Insurance," in Nineteenth Century, 
iv, 834 (1878). 

2 Hansard, 1880, cclii, 1180. 3 National Review, xviii, 721. 

4 For a summary of plans proposed, including those which have 



154 STATE INSURANCE 

Whatever other conclusions may have been 
reached during the past twenty years, it is 
generally agreed that plans for old-age relief 
which are purely optional fall far short of 
reaching the evils which they seek to alleviate. 
The postal savings banks of Great Britain and 
the caisse des retraites in France, established 
as early as 1860, have proved highly useful to 
the more thrifty and better-paid workmen, but 
the problem of old-age poverty remains. In 
order to make the securing of pensions more 
attractive to the less thrifty classes, it has some- 
times been thought advisable to add to their 
contributions something in the nature of a 
government subsidy. This was one of the fea- 
tures of the Blackley-Chamberlain proposal. 
A little later, in 1891, a measure was proposed 
in France by Constans and Rouvier, known as 
the pro jet Constans, under which the workman 
was to pay a small sum daily, which was to be 
duplicated by the employer, the state to add 
two thirds as much as the total. 

It is interesting to note in the discussions of 
that day how slowly people were becoming 
reconciled to the idea of any plan of old-age 
pensions which was not entirely optional. To 
an English critic of the time the various plans 
proposed seemed to be those of "impulsive 

been enacted into law, see F. Parsons, The Story of New Zealand, 
Appendix HI, pp. 796-798. 



OLD-AGE PENSIONS 155 

philanthropists and empirical faddists." The 
projet Constans was denounced as charlatan- 
esque. 1 

There have always been radical differences 
of opinion as to some of the main features of 
old-age pensions. What age shall be fixed 
upon for the commencement of old-age relief ? 
Shall pensions be placed upon a contributory 
basis, and, if so, shall the state offer a subsidy 
as an inducement to contributions? Shall 
contribution be compulsory ? If pensions are 
to be gratuitous, shall they be universal or 
limited according to need, merit, or other 
test? 

The question has been studied and scrutin- 
ized from every point of view. It was proposed 
by Canon Blackley that the young man, at the 
very beginning of his industrial career, should 
make such a contribution to a fund, to be con- 
trolled by the government, as should entitle 
him to relief in sickness and old age, the latter 
to be fixed at sixty-five years, — the contribu- 
tion to be compulsory. It seemed to Cham- 
berlain, following in the lead of Blackley, that 
instead of compulsion it would be better for 
the government to offer such inducements in 
the way of subsidies as would lead to the pay- 

1 P. Leroy-Beaulieu, in L'Economiste Frangais, July 4, 1891: 
"Panama etait l'entreprise la plus charlatanesque de ce siecle ; mais 
voici . . . une conception financiere qui n'est pas moins charlatan- 
esque que celle defunte Compagnie de Panama." 



156 STATE INSURANCE 

ments of these contributions. A similar idea 
was advanced in the pro jet Constans. But 
there has been much skepticism as to whether 
any inducements which a government could 
properly offer would prove effectual in attract- 
ing any except the more thrifty. It is difficult 
to impress vividly upon the minds of the 
young the danger of old-age poverty. Neither 
logic nor statistics seem to carry weight with 
them. Whatever the risk of such a disaster, 
looked at from a distance of forty years it 
seems very remote. 

The tendency of late has been to reject all 
optional plans — except as they are already 
furnished — as ineffectual without compul- 
sion, and to reject compulsion as unsuited to 
the "free-born Briton" or American. 

In most of the current discussion the field 
seems to be thus narrowed down to giving a 
pension at some age, either universally or to 
those who combine merit and need. 

It was the plan of Booth in England fifteen 
years ago, and of Edward Everett Hale in 
Massachusetts later, to eliminate entirely the 
question of need and to make pensions pay- 
able to all. Booth justifies the plan partly 
upon the theory that by this method the 
wealthier classes who pay the larger amount of 
taxes would virtually pay the pensions of the 
poorer, the middle classes simply getting back 



OLD-AGE PENSIONS 157 

in pensions what they had paid in taxes 
toward the general pension fund. Certain 
considerations as to the real incidence of taxes 
are ignored. 1 The expense of such a scheme 
seems to most minds appalling and in itself 
sufficient to condemn it without further con- 
sideration. Booth's estimate for England and 
Wales was $85,000,000, and for the whole 
kingdom about $117,000,000, but he claimed 
that as an offset to the rate-payer there would 
be a very considerable reduction in poor-rates. 
In the discussion of the plan grave doubts 
whether the estimates were high enough were 
freely expressed. But it is to be questioned 
whether the expense of such schemes consti- 
tutes the gravest objection, and it is doubtful 
whether they will receive much further con- 
sideration. 

While we seem to have passed beyond 
schemes for universal pensions, probably per- 
manently, the world has gone far — whether 
wisely or not will be discussed later — in the 
direction of pensions as a gratuity from the 
state, without compulsion, without contribu- 
tion, but with a sharp discrimination as to the 
need and merit of the applicant. The schemes 
already enacted into law agree in limiting the 
benefit to citizens ; in requiring that the party 
shall not have been convicted within a certain 

1 Journal of Royal Statistical Society, 1891, liv, 600-643. 



158 STATE INSURANCE 

time of crime or serious misdemeanor; and 
that he shall not have been a recipient of poor- 
relief. Those are also excluded who have 
a certain amount of property or income, the 
amount of the pension if granted being dimin- 
ished according to income. Plans vary as to 
the mode of administration, the amount of 
relief, and the age at which it shall commence. 
Denmark may be deemed the pioneer in this 
field of social legislation. Her law of 1891 is 
administered by the communal authorities ; the 
pension age is fixed at sixty; the amount of 
the pension is left indeterminate, it being pro- 
vided only that it should be sufficient, to be 
adjusted by the authorities. But the idea took 
root most readily in New Zealand and the 
Commonwealth of Australia, countries which 
are coming to be looked upon as laboratories 
for experiments in social legislation. The law 
of New Zealand was passed in 1898, although 
it had been urged upon two previous parlia- 
ments. It provided for pensions, at sixty-five, 
of seven shillings per week ; for public exam- 
inations of applicants who are questioned as 
to need, as to previous records, and as to pro- 
perty and income. By a later act, 1905, the 
amount of the pension was raised to ten shill- 
ings, and it was provided that the magistrate 
might, in his discretion, conduct examina- 
tions in camera. This was for the purpose of 



OLD-AGE PENSIONS 159 

meeting the criticism that under the earlier 
law many worthy persons were unwilling to 
submit to an examination in public. The 
amendments were significant as indicating a 
tendency in all such legislation towards pro- 
visions more liberal to the beneficiaries, — a 
tendency to enlarge rather than to restrict. 

Victoria and New South Wales followed the 
lead of New Zealand two years later. The law 
of Victoria contained a new feature in leaving 
the age at which pensions should commence 
indeterminate to the extent of providing that 
they should be due upon permanent disability 
if resulting from labor in mines or any un- 
healthy or hazardous occupation. Nor did it 
fix absolutely the amount of the pension, 
merely prescribing a maximum of ten shillings 
per week. 

It is the testimony of competent observers 
who have made a careful study of the subject 
at first hand, that these pension laws work 
very satisfactorily. 1 These observers place a 
high value upon the law and its administra- 
tion in stimulating public interest and in cre- 
ating a kindlier appreciation of the hardships 
of old-age poverty and the beneficence of the 
relief granted. The system has acquired so 

1 Edith Sellers, " In Danish and Russian Old Age Homes," Nine- 
teenth Century, Hi, 643; H. D. Lloyd, In Newest England, p. 362; 
F. Parsons, The Story of New Zealand, p. 461. 



160 STATE INSURANCE 

strong a hold upon the public in these Austra- 
lasian colonies that it will be very difficult to 
effect any legislation in the direction of meth- 
ods economically more sound. 

The old-age pension act of England * which 
has been passed recently, to go into effect on 
January 1, 1909, follows substantially the gen- 
eral lines of the New Zealand law. It provides 
for pensions of five shillings a week, commenc- 
ing at the age of seventy, the applicant being 
required to make out a case of merit and need. 
The speech of Asquith outlines the plan and 
discusses somewhat elaborately the details. 
He estimated the cost at $30,000,000 to 
$37,500,000, but others have placed it at 
$57,500, 000. 2 Financial considerations deter- 
mined the pension age, it being calculated that 
the cost with the pension age at sixty-five 
would be about sixty-four per cent greater 
than at seventy, — a very serious addition to 
the public burden. It was explained that the 
amount of the weekly pension, which seems 
meagre, was intended to eke out rather than 
to supply an adequate income. It may be 
deemed almost certain that there will be early 
agitation in favor both of lowering the pension 
age to sixty-five and of increasing the weekly 
allowance. 

1 8 Edw. VII, ch. 40. 

2 Balfour, Speech in House of Commons, London Times, July 10. 



OLD-AGE PENSIONS 161 

As this law has been adopted by a parlia- 
ment not given to hasty or ill-considered legis- 
lation, and is a social experiment to be tried 
on the largest scale yet attempted, it attracts 
world-wide attention and may well furnish the 
text for the discussion of the group of laws of 
which it forms so important a part. 

The most obvious criticism to be made upon 
all such legislation is that it is purely empir- 
ical, and that too in a field where mistakes 
are almost irretrievable. The acute symptoms 
of a serious malady seem to be treated rather 
than the disease itself. The social effects of 
such laws, both near and remote, are entirely 
problematical. Whether they will promote or 
discourage thrift, increase or diminish pauper- 
ism, is a matter upon which there is no agree- 
ment. And it is not probable that the doubt 
can be satisfactorily solved for decades to 
come. 

It is quite within limits to say that the 
motive which brought about the legislation in 
England was political rather than economic. 
The social demand which had been rising for 
more than thirty years, especially since the 
agitation led by Canon Blackley in 1878, 
made the situation acute. There was an urgent 
call upon Parliament to do something. The 
elaborate investigations of royal commissions 
and parliamentary committees had not fed the 



162 STATE INSURANCE 

hungry nor mitigated the privations and suf- 
fering of old-age penury. The attitude of the 
friendly societies, always hostile to any legis- 
lation which could affect their growth or 
prosperity, had to be taken into consideration ; 
they have not infrequently stood athwart the 
pathway towards sound legislation. There 
was therefore the inevitable yielding to a pop- 
ular demand. All idea of compulsion was 
rejected with the customary phrases. It was 
something "under which the British work- 
man was not prepared to stand." ■ It seems 
to be always forgotten on such occasions that 
the British rate-payer has been under compul- 
sion of a very odious sort on this very account 
for the past three hundred years. 

Warnings against the proposed legislation 
and forebodings as to the future were uttered 
in the press as well as in the parliamentary 
debates. It was realized that a mistake was 
being made, not only grave but irreparable. 

It had been pointed out by Canon Blackley 
in the discussion of the Booth scheme how dif- 
ficult, almost impossible, it would be to re- 
strict it in the future. 2 That would of course 
be true generally of legislation enacted in 
obedience to an unreasonable popular de- 
mand. If a pension scheme were made uni- 

1 Asquith, Speech at Birmingham, London Times, June 20, 1908. 

2 Journal of Royal Statistical Society, lv, 67. 



OLD-AGE PENSIONS 163 

versal, it would be impracticable afterwards to 
limit it to the meritorious and the needy; if 
made gratuitous, to make it either wholly or 
in part contributory; if optional, to make it 
compulsory. 

It was said of the English bill by Arthur 
Chamberlain in the House of Commons that 
if it should become a law any contributory 
scheme would be impossible in the present or 
the future, and the "Times" editorially de- 
clared that no one believed in it or thought it 
would solve any difficulty, and that it would 
perhaps be impossible to "revert to any scheme 
based on scientific and economic principles." 1 

It has been claimed that statistics show that 
in Great Britain, out of 1000 men living at the 
age of twenty, 500 will be living at sixty-five, 
and 200 after reaching that age will become 
paupers. It has been stated too that eight 
ninths of the pauperism beyond that age is 
old-age pauperism. 2 A wage census cited by 
the Chancellor of the Exchequer shows that 
fifty-seven per cent of the wage-earners of the 
kingdom earn less than twenty-five shillings 
per week. These figures are significant of a 
situation whose gravity need not be empha- 
sized. It was time for Great Britain to act. 
But she has embarked upon an uncharted sea. 

1 London Times, May 6, June 10, et passim. 

2 Booth, sup. cit. p. 631. 



164 STATE INSURANCE 

She enters upon an experiment whose cost will 
be enormous though vague. It can hardly be 
doubted that she has made a colossal blunder 
of which the financial cost will be almost neg- 
ligible compared with the serious economic 
consequences. The return to sane legislation 
will be slow and painful. 

In the discussion of the subject of old-age 
relief it is not always clearly seen that there 
are two problems involved : To cure a system 
which is radically defective and to alleviate 
the present evils which are the result of that 
system. The treatment which is appropriate 
for the relief of the acute suffering from the 
disease has no necessary relation to the cure of 
the disease itself. From whatever point of view 
we look at it, we must agree that old-age pov- 
erty is the result of an industrial or economic 
system which is at fault somewhere. The cor- 
rection must come through radical legislation, 
but upon scientific economic principles. 

Unquestionably relief for the aged pauper 
of to-day must be sought through legislation, 
provisionally for the prospective pauper of ten 
or twenty years hence ; but we may not wisely 
by the same law seek to deal with the future 
of the young man of thirty or twenty in view of 
a possible catastrophe forty or fifty years in the 
future, which might be averted by rational 
treatment. In the one case we attempt to 



OLD-AGE PENSIONS 165 

atone, in a rude fashion, for an error com- 
mitted long ago ; in the other we propose to 
provide for an error which we are to commit 
continuously and indefinitely. 

It is becoming the fashion to speak of pro- 
vision for old-age pauperism as an act of right 
and justice and not of charity ; but in the na- 
ture of the case there can be only a rude sem- 
blance of justice in methods proposed by leg- 
islation like that in England and New Zealand. 
The examinations into the merits of applicants 
must necessarily be somewhat inquisitorial. It 
was humorously suggested in the debate in the 
House of Commons that there was not a mem- 
ber of the House who could qualify on the in- 
dustrial test imposed by the English Act of 
1908, that he had always worked according 
to his ability. As the administration of the 
law depends largely upon local boards, there 
will be much diversity in its interpretation. 
Possibly in effect there will be merely an- 
other grade of poor-relief; — the almshouse 
or the workhouse for the lowest class of 
paupers; outdoor relief for those who are 
deemed more worthy, perhaps for many who 
fail to furnish proof as to age or merit; and 
pensions for the deserving poor. There will be 
little gain, from the moral standpoint, if the 
recipient of a pension is still looked upon as 
accepting charity. 



166 STATE INSURANCE 

But of those elevated to the ignoble nobility 
of the deserving poor there must be all degrees 
of merit. If the state owes the old-age pauper 
something as a matter of justice, does it owe 
him five shillings a week, or ten, or some other 
sum? If it seeks to compensate the wage- 
earner for the ill-requited toil of fifty years, 
what tribunal could determine what was his 
due ? And at what age shall he be deemed to 
have earned exemption from toil F Shall it be 
at seventy, or sixty-five, or sixty, or, in the event 
that old age has been brought on prematurely 
by the nature of his occupation, at permanent 
disablement ? In the laws referred to it has 
generally been thought expedient to fix these 
data arbitrarily and to leave little to the dis- 
cretion of those who administer them. Even 
in the exclusion of the least worthy, so called, 
there must often be a failure of abstract just- 
ice. We speak confidently about the deserts of 
those whose poverty can be traced to impro- 
vidence and vice, but we forget that impro- 
vidence and intemperance are often the result 
of poverty, of those hard industrial conditions 
which tend to impair moral vigor, to lessen 
resistance, and even to disturb the natural 
balance of men's minds. 

These considerations are pertinent as show- 
ing the great difficulties which surround this 
problem of old-age poverty and the danger of 



OLD-AGE PENSIONS 167 

treating it superficially rather than scienti- 
fically. Our attitude in the past has been 
deemed charitable rather than economic, but 
it has not been entitled to that term. The 
Church once enjoined upon the prosperous 
the duty of giving to the poor in obedience to 
a divine command always binding upon the 
hearts and consciences of Christians. The 
tax-payer of to-day, yielding up poor-rates 
grudgingly, responding to force rather than 
any Christian or humane obligation, does not 
belong in the same category as the mediaeval 
Christian. The State does not concern itself 
as the Church did as to the state of mind of the 
giver. 

If we reject as unscientific and in the broad- 
est sense impracticable the schemes outlined 
in recent legislation, what fundamental prin- 
ciple shall be applied to future projects ? The 
answer can be comprehended in a sentence. 
They must be contributory and they cannot 
be made effectually contributory without com- 
pulsion. Whether the wage-earner reaches old- 
age poverty through his own fault or that of 
society, the fault should be corrected in its 
early rather than in its late stages, when we 
apply palliatives rather than remedies. If ade- 
quate wages have been wasted throughout the 
period of the workman's industrial efficiency, 
some measure should prevent it, to the end 



168 STATE INSURANCE 

that we shall not levy upon the thrifty for the 
support of the thriftless. This suggests con- 
tribution on the part of the improvident and 
necessarily compulsion. 

If, on the other hand, we conclude that the 
old-age pauper has been the victim of indus- 
trial conditions which make saving practically 
impossible, we should still administer the 
remedy at the beginning; if a portion of his 
wages have been withheld from him, an ac- 
count should be kept of what margin remains 
due. 

In the discussion of the scheme of con- 
tribution enforced by compulsion we are ac- 
customed to the sneer at compulsory thrift. 
The phrase reveals a misconception of the 
function of such legislation. We may compel 
the practice of thrift if not the virtue, as we 
may compel education or obedience to crim- 
inal law. But we may encourage thrift among 
the thrifty by removing the burden which has 
been imposed upon them of supplying the 
defects of the thriftless. It might not be over- 
sanguine to hope that a habit of thrift would 
be acquired even under compulsion. The law 
of Elizabeth has been tried for three hundred 
years as a mode of dealing with the problem 
of pauperism, with deplorable results ; when 
Germany's experiment of compulsory insur- 
ance for old age has been tried as long, what 



OLD-AGE PENSIONS 169 

may not be expected in moral and economic 
regeneration ! 

If, then, there must be insurance against 
old age and invalidity, and if it must be con- 
tributory and compulsory, how shall the 
charges be met ? There can be but one logical 
answer: The cost must be borne by the in- 
dustry which consumes labor. The group of 
workmen in a given employment virtually 
dedicate their lives to it. To it they bring all 
that they have to offer of labor and of indus- 
trial skill during life. They are bound to it by 
a sort of inheritance, by training, and by the 
immobility of labor. Their reward for toil, 
both for the productive and the unproductive 
periods of life, must, by immutable law, either 
come from that particular industry or must at 
some point be supplied by society at large. 
The industry cannot rightfully do less than 
to meet the obligation. The question of in- 
cidence is discussed elsewhere. 1 

The subject of old-age and invalidity relief 
is of transcendent importance. No other 
social question of the present more urgently 
demands sagacious legislation. It cannot be 
regarded simply from the standpoint of 
finance or expediency, nor with regard to tem- 
porary relief of acute suffering which happens 
to appeal to our sympathies. 

1 Chapter VII. 



\S 



170 STATE INSURANCE 

We must seek for a solution which will be 
adequate, not merely to pacify the superficial 
sentiment of to-day, but to justify us in the 
less indulgent but more enlightened judgment 
of the future. 



IX 

CONCLUSION 

The impressive fact connected with insurance 
for the wage-earner is his economic insecurity. 
He is continually in a state of unstable equi- 
librium. However satisfactory and secure the 
present may seem, the future must be clouded 
with uncertainty and apprehensions of pos- 
sible disaster. His prosperity for the present 
moment depends upon his capacity for labor 
and his employment at a living wage ; but that 
gives him no assurance as to the future. As 
long as his daily wages are exhausted in meet- 
ing his daily needs, the workman is gambling 
upon his possible immunity from accident, 
sickness, or other misfortune. Unfortunately 
that is the ordinary test of a living wage — a 
remuneration adapted to days of sunshine and 
not to all kinds of weather that may befall. 

Even judged by this imperfect standard, it 
seems to be the concurrent judgment of most 
of those who have examined the subject, with- 
out prejudice or self-interest, that the vast 
majority of workmen in this country and else- 
where receive less than a living wage. Nor, 
viewed from another aspect, by a similar con- 
currence of judgment, does he receive his due 



172 STATE INSURANCE 

share of the product of labor. While there is 
essentially a partnership between capital and 
labor, one of the parties arrogantly and arbi- 
trarily decrees what the other shall receive. 
He bases his action upon the law of supply 
and demand, but reserves to himself the right 
to take every possible advantage of the im- 
mobility of labor and to use the immense eco- 
nomic advantage which he has to interfere 
with the law of supply and demand by arti- 
ficially increasing the supply at his pleasure. 
The great injustice which the laboring man 
has usually suffered from his contractual in- 
equality has been tremendously accentuated 
with the introduction of machinery and the 
application of steam and electricity to indus- 
try. 

Meantime the state has usually shown far 
greater solicitude for the rights of property 
than for the rights of man. According to 
Joseph Chamberlain : " The rights of property 
have been so much extended that the rights of 
the community have almost altogether disap- 
peared, and it is hardly too much to say that 
the prosperity and comfort and the liberties 
of a great proportion of the population have 
been laid at the feet of a small number of pro- 
prietors, who neither toil nor spin." It has 
been said that all of the jurisprudence of 
civilized countries is bourgeois — which is to 



CONCLUSION 173 

say that those who make and interpret laws 
are mainly from the bourgeoisie and from 
the upper classes and are humanly affected 
by their environment. This characterization 
finds illustration in the swift enactment of a 
"Statute of Labourers" frequently reenacted 
with cumulative severity, condemning the 
toilers of England to a condition worse than 
feudal servitude, as compared with factory 
acts and workmen's compensation acts which 
can be successfully opposed for decades. 

These points are alluded to as bearing upon 
the claim, so frequently as so thoughtlessly 
made, that the wage-earner's poverty, help- 
lessness, and dependence are the result of the 
lack of thrift and of improvidence, regardless 
of the fact that he makes no provision for the 
future for the reason that he cannot even meet 
the far more imperious wants of the present. 

But waiving the question whether the work- 
man receives a living wage measured by the 
defective standard of his daily needs under 
normal conditions, it must be manifest that it 
does not usually go beyond that. The labor 
contract is ordinarily entered into as though 
there were to be nothing but sunshine and fair 
weather in the industrial world. 

How long, in a given industry, a man's 
capacity for labor may endure, whether fifty 
years or — as has been the case in unhealthy 



174 STATE INSURANCE 

employments — twenty years or ten ; how 
great the average peril from accidents; what 
additional losses from the ordinary vicissi- 
tudes of life, — all of these matters are either 
utterly ignored or very inadequately consid- 
ered. 

Assuming that the working capacity should 
last fifty years, what ought an industry to pay 
which exhausts that capacity in twenty years, 
with a probability of thirty years of invalidity ? 
What if it threatens a loss of from five to fif- 
teen per cent through sickness ? What allow- 
ance shall be made for accidents with a risk 
ranging from one thirty-fifth of one per cent to 
ten per cent of the wages ? And is it tolerable 
that the trade which involves the maximum of 
risk shall pay even less wages than the one in- 
volving a minimum ? Would not a system of 
insurance for all, scientifically adjusted, un- 
veil the nature and extent of defective scales 
of wages and suggest a remedy which would 
lead towards economic justice and industrial 
equality. 

Starting with what may be deemed a fair 
rate of wages, judged by the ordinary stand- 
ards of the past, it is actuarially practicable 
to determine the average loss from premature 
death, from invalidity, from accidents, and 
from sickness ; what percentage of the annual 
wage these items in the aggregate constitute, 



CONCLUSION 175 

and what must be added to wages to cover 
them. 

It would be unprofitable at this time to 
discuss anything but the merest outline of 
a scheme of insurance for workmen in this 
country. In general, the German scheme must 
be the guide, as it has been for most of the 
countries of Europe. But the administration 
of the German law is extremely complex. This 
complexity was largely the result of compelling 
circumstances. It was necessary to take a con- 
ciliatory attitude towards friendly societies 
and other existing organizations, and to utilize 
their machinery; especially necessary to pre- 
serve to the utmost, in the new law, the idea of 
mutuality and self-help which those institu- 
tions had stimulated. Thus the government 
could avail itself of the efficient machinery 
already in operation and at the same time an 
opposition to the insurance measures, other- 
wise certain, was skillfully disarmed. The 
resulting system, one of great complexity and 
infinite detail, could be greatly improved upon 
by any state taking up the subject anew; 
indeed it seems probable that the German 
administration of its workmen's insurance 
may be radically revised in the direction of 
methods more simple and more scientific. 
Nor is the adjustment of the incidence of 
the burden of insurance, distributed between 



176 STATE INSURANCE 

the state, the employer, and the workman — a 
concession, perhaps, to current prejudices — 
worthy of imitation. It is objectionable, as 
suggested elsewhere, as serving to confuse and 
disguise important economic facts and tending 
to foster in the minds of both parties to the 
labor contract the mischievous notion that 
the workman is a recipient of the bounty of the 
employer or of the state. 

It would not be difficult to frame a practical 
scheme for workmen's insurance for a state 
like Massachusetts. It would perhaps follow 
in its general features the German law. It 
would indicate those upon whom the insur- 
ance should be obligatory, the amount of in- 
surance to be carried, the several purposes to 
which it should be applicable, the amount of 
premiums, and the mode of payment. It could 
permit insurance through existing organiza- 
tions but prescribe that it should be effected 
through the state unless equivalent provision 
had been made elsewhere subject to the ap- 
proval of the Insurance Department. It might 
contemplate voluntary payments on the part 
of the insured, but direct that in case of failure 
to make such payments the employer should 
meet the insurance charges out of the wages 
of the employee. 

The law would specify minutely under what 
conditions benefits should be paid ; how long a 



CONCLUSION 177 

period of disability from accidents should be 
covered and the amount payable, based upon 
wages ; how much and what sick-pay should 
be allowed ; in what form insurance should be 
paid in the event of death, whether by annui- 
ties or otherwise ; at what age pensions should 
commence and what should constitute invalid- 
ity. It would also prescribe under what con- 
ditions medical and surgical attendance should 
be rendered and make provision for the con- 
struction of adequate hospitals and sanatoria. 

For the administration of such a plan the 
state is already partially equipped. It has a 
highly efficient insurance department and an 
insurance commissioner with large powers of 
supervision, control, and direction. This de- 
partment can perform all of the actuarial work 
required for the proposed system. It can pre- 
pare and publish tables of morbidity and 
tariffs of risks, somewhat tentative at first but 
gradually attaining a high degree of accuracy. 
It could advise Richard Roe at any time of life 
and engaged in any kind of employment just 
what it will cost him per year, in a single 
item, to insure against death, accidents, sick- 
ness, invalidity, and old age. 

The department would doubtless find it con- 
venient to make use of the assessors in the 
cities and towns throughout the state in ac- 
quiring the data needed for its purposes. It 



178 STATE INSURANCE 

would add but slightly to the work of the 
assessors, in their annual canvass of the state, 
to procure the additional information. In 
addition to the work of the insurance depart- 
ment and the assessors, there would be needed 
in each town or ward of a city an insurance 
agent whose work would be done under the 
direction of the department. 

For the inauguration of such a system in 
Massachusetts, for example, hardly more is 
needed than an intelligent and definite pur- 
pose. There is not needed the constructive 
statesmanship of a Bismarck. The way has 
been blazed ; the experiment of a quarter of a 
century ago has proved manifestly successful. 
"The Utopia of yesterday has become the 
terra cognita of to-day." 



APPENDICES 



APPENDICES 
APPENDIX A 

(Section 25 of the Prussian Railroad Law of Nov. 8, 1838.) 
" The Company is required to make good any injury 
which may arise to any goods or any person carried on 
any railroad, or to other goods or persons,unless it can 
prove that such damage was due to the negligence of the 
injured person, or the result of unavoidable external 
accident. But the dangerous nature of the enterprise is 
not an explanation of an accident which excuses from 
the payment of damages." 



APPENDIX B 

(Georgia Laws of 1855 and 1856, No. 103, Sec. m.) 

The several railroad companies of this state shall 
be liable to pay damages to any officer, agent or em- 
ployee of any such company who may be injured while 
in the service of any such company, by the carelessness, 
negligence or improper conduct of any of said com- 
panies or any of the other officers, agents or employees 
of said companies by the running of the cars or engines 
of said companies. 

(Georgia Code of 1861.) 

Sec. 2978. A railroad company shall be liable for 
any damage to persons, stock or other property, by the 
running of the locomotives, cars or other machinery 
of such company, or for damage done to any person in 
the employment and service of such company, unless 
the company shall make it appear that their agents 
have exercised all ordinary and reasonable care and 
diligence, the presumption, in all cases, being against 
the company. 

Sec. 2979. No person shall recover damages from 
a railroad company for injury to himself or his property 
when the same is done by his consent, or is caused by 
his negligence. If the complainant and the agents of 
the company are both at fault, the former may recover, 
but the damages shall be diminished by the jury in pro- 
portion to the amount of fault attributable to him. 

Sec. 2980. If the person injured is himself an 
employee of the company, and the damage was caused 
by another employee, and without fault or negligence 
on the part of the person injured, his employment by 
the company shall be no bar to recovery. 



APPENDIX C 

(From Chapter 106, Revised Laws of Massachusetts, with amend- 
ment of 1906. The not very important amendments of 1908 are not 
incorporated. It is substantially the law of 1887, modeled after the 
so-called Gladstone Act — the English law of 1880.) 

Section 71. If personal injury is caused to an 
employee, who, at the time of the injury, is in the exer- 
cise of due care, by reason of: 

First, A defect in the condition of the ways, works 
or machinery connected with or used in the business 
of the employer, which arose from, or had not been 
discovered or remedied in consequence of, the neg- 
ligence of the employer or of a person in his service 
who had been entrusted by him with the duty of 
seeing that the ways, works or machinery were in 
proper condition ; or, 

Second, The negligence of a person in the service 
of the employer who was entrusted with and was 
exercising superintendence and whose sole or princi- 
pal duty was that of superintendence, or, in the 
absence of such superintendent, of a person acting 
as superintendent with the authority or consent of 
such employer; or, 

Third, The negligence of a person in the service 

of the employer who was in charge or control of a 

signal, switch, locomotive engine or train upon a 

railroad ; 

the employee, or his legal representatives, shall, subject 

to the provisions of the eight following sections, have 

the same rights to compensation and of action against 

the employer as if he had not been an employee, nor in 

the service, nor engaged in the work, of the employer. 



184 APPENDIX 

A car which is in use by, or which is in possession of, 
a railroad corporation shall be considered as a part of 
the ways, works or machinery of the corporation which 
uses or has it in possession, within the meaning of 
clause one of this section, whether it is owned by such 
corporation or by some other company or person. One 
or more cars which are in motion, whether attached to 
an engine or not, shall constitute a train within the 
meaning of clause three of this section, and whoever as 
a part of his duty for the time being physically controls 
or directs the movements of a signal, switch, locomotive 
engine or train shall be deemed to be a person in charge 
or control of a signal, switch, locomotive engine or train 
within the meaning of said clause. 

Section 72. (As amended by Chapter 370 of the 
Acts of 1906.) If the injury described in the preceding 
section results in the death of the employee, and such 
death is not instantaneous or is preceded by conscious 
suffering, and if there is any person who would have 
been entitled to bring an action under the provisions 
of the following section, the legal representatives of 
said employee may, in the action brought under the 
provisions of the preceding section, recover damages 
for the death in addition to those for the injury ; and in 
the same action, under a separate count at common law, 
may recover damages for conscious suffering resulting 
from the same injury. 

Section 73. If, as the result of the negligence of an 
employer himself, or of a person for whose negligence 
an employer is liable under the provisions of section 
seventy-one, an employee is instantly killed, or dies 
without conscious suffering, his widow, or, if he leaves 
no widow, his next of kin, who, at the time of his 
death, were dependent upon his wages for support, 



APPENDIX 185 

shall have a right of action for damages against the 
employer. 

Section 74. If, under the provisions of either of the 
two preceding sections, damages are awarded for the 
death, they shall be assessed with reference to the degree 
of culpability of the employer or of the person for whose 
negligence the employer is liable. 

The amount of damages which may be awarded in 
an action under the provisions of section seventy-one 
for a personal injury to an employee, in which no dam- 
ages for his death are awarded under the provisions 
of section seventy-two, shall not exceed four thousand 
dollars. 

The amount of damages which may be awarded in 
such action, if damages for his death are awarded under 
the provisions of section seventy- two, shall not exceed 
five thousand dollars for both the injury and the death, 
and shall be apportioned by the jury between the legal 
representatives of the employee and the persons who 
would have been entitled, under the provisions of sec- 
tion seventy-three, to bring an action for his death if it 
had been instantaneous or without conscious suffering. 

The amount of damages which may be awarded in 
an action brought under the provisions of section 
seventy-three shall not be less than five hundred nor 
more than five thousand dollars. 

Section 75. No action for the recovery of damages 
for injury or death under the provisions of sections 
seventy-one to seventy-four, inclusive, shall be main- 
tained unless notice of the time, place and cause of the 
injury is given to the employer within sixty days, and 
the action is commenced within one year, after the acci- 
dent which causes the injury or death. Such notice shall 
be in writing, signed by the person injured or by a per- 



186 APPENDIX 

son in his behalf ; but if from physical or mental incapac- 
ity it is impossible for the person injured to give the 
notice within the time provided in this section, he may 
give it within ten days after such incapacity has been 
removed, and if he dies without having given the notice 
and without having been for ten days at any time after 
his injury of sufficient capacity to give it, his executor 
or administrator may give such notice within sixty days 
after his appointment. A notice given under the provi- 
sions of this section shall not be held invalid or insuffi- 
cient solely by the reason of an inaccuracy in stating the 
time, place or cause of the injury, if it is shown that 
there was no intention to mislead, and that the employer 
was not in fact misled thereby. The provisions of sec- 
tion twenty-two of chapter fifty-one shall apply to 
notices under the provisions of this section. 

Section 76. If an employer enters into a contract, 
written or verbal, with an independent contractor to do 
part of such employer's work, or if such contractor 
enters into a contract with a sub-contractor to do all or 
any part of the work comprised in such contractor's 
contract with the employer, such contract or sub- 
contract shall not bar the liability of the employer for 
injuries to the employees of such contractor or sub- 
contractor, caused by any defect in the condition of the 
ways, works, machinery or plant, if they are the pro- 
perty of the employer or are furnished by bim and if 
such defect arose, or had not been discovered or reme- 
died, through the negligence of the employer or of some 
person entrusted by him with the duty of seeing that 
they were in proper condition. 

Section 77. An employee or his legal representatives 
shall not be entitled, under the provisions of sections 
seventy-one to seventy-four, inclusive, to any right of 



APPENDIX 187 

action for damages against his employer if such em- 
ployee knew of the defect or negligence which caused 
the injury, and failed within a reasonable time to give, 
or cause to be given, information thereof to the em- 
ployer, or to some person superior to himself in the 
service of the employer who was entrusted with general 
superintendence. 

Section 78. An employer who shall have contributed 
to an insurance fund created and maintained for the 
mutual purpose of indemnifying an employee for per- 
sonal injuries for which compensation may be recov- 
ered under the provisions of sections seventy-one to 
seventy-four, inclusive, or to any relief society formed 
under the provisions of sections seventeen, eighteen and 
nineteen of chapter one hundred and twenty-five, may 
prove, in mitigation of the damages recoverable by an 
employee under the provisions of said sections, such 
proportion of the pecuniary benefit which has been 
received by such employee from any such fund or 
society on account of such contribution of said em- 
ployer as the contribution of such employer to such 
fund or society bears to the whole contribution thereto. 

Section 79. The provisions of the eight preceding 
sections shall not apply to injuries caused to domestic 
servants or farm laborers by fellow employees. 



APPENDIX D 

BRITISH WORKMEN'S COMPENSATION ACT OF 1906. 
An Act to consolidate and amend the law with respect 

to compensation to workmen for injuries suffered in 

the course of their employment [21st December, 

1906]. 

Be it enacted by . . . Parliament assembled, and by 
the authority of the same, as follows: 

1. — (1) If in any employment personal injury by 
accident arising out of and in the course of the employ- 
ment is caused to a workman, his employer shall, subject 
as hereinafter mentioned, be liable to pay compensation 
in accordance with the first schedule to this act. 

(2) Provided that — 

(a) The employer shall not be liable under this act in 
respect of any injury which does not disable the work- 
man for a period of at least one week from earning full 
wages at the work at which he was employed; 

(6) When the injury was caused by the personal neg- 
ligence or willful act of the employer or of some person 
for whose act or default the employer is responsible, 
nothing in this act shall affect any civil liability of the 
employer, but in that case the workman may, at his 
option, either claim compensation under this act or 
take proceedings independently of this act; but the 
employer shall not be liable to pay compensation for 
injury to a workman by accident arising out of and in 
the course of the employment both independently of 
and also under this act, and shall not be liable to any 
proceedings independently of this act, except in case of 
such personal negligence or willful act as aforesaid; 



APPENDIX 189 

(c) If it is proved that the injury to a workman is 
attributable to the serious and willful misconduct of 
that workman, any compensation claimed in respect 
of that injury shall, unless the injury results in death 
or serious and permanent disablement, be disallowed, 

(3) If any question arises in any proceedings under 
this act as to the liability to pay compensation under 
this act (including any question as to whether the per- 
son injured is a workman to whom this act applies), 
or as to the amount or duration of compensation under 
this act, the question, if not settled by agreement, shall, 
subject to the provisions of the first schedule to this act, 
be settled by arbitration, in accordance with the second 
schedule to this act. 

(4) If, within the time hereinafter in this act limited 
for taking proceedings, an action is brought to recover 
damages independently of this act for injury caused by 
any accident, and it is determined in such action that 
the injury is one for which the employer is not liable in 
such action, but that he would have been liable to pay 
compensation under the provisions of this act, the 
action shall be dismissed; but the court in which the 
action is tried shall, if the plaintiff so choose, proceed 
to assess such compensation, but may deduct from such 
compensation all or part of the costs which, in its judg- 
ment, have been caused by the plaintiff bringing the 
action instead of proceeding under this act. In any 
proceeding under this subsection, when the court as- 
sesses the compensation it shall give a certificate of 
the compensation it has awarded and the directions 
it has given as to the deduction for costs, and such 
certificate shall have the force and effect of an award 
under this act. 

(5) Nothing in this act shall affect any proceeding 



190 APPENDIX 

for a fine under the enactments relating to mines, fac- 
tories, or workshops, or the application of any such 
fine. 

2. — (1) Proceedings for the recovery under this act 
of compensation for an injury shall not be maintainable 
unless notice of the accident has been given as soon as 
practicable after the happening thereof and before the 
workman has voluntarily left the employment in which 
he was injured, and unless the claim for compensation 
with respect to such accident has been made within six 
months from the occurrence of the accident causing 
the injury, or, in case of death, within six months 
from the time of death : 

Provided always that — 

(a) The want of or any defect or inaccuracy in such 
notice shall not be a bar to the maintenance of such 
proceedings if it is found in the proceedings for settling 
the claim that the employer is not, or would not, if a 
notice or an amended notice were then given and the 
hearing postponed, be prejudiced in his defense by 
the want, defect, or inaccuracy, or that such want, 
defect, or inaccuracy was occasioned by mistake, ab- 
sence from the United Kingdom, or other reasonable 
cause; and 

(b) The failure to make a claim within the period 
above specified shall not be a bar to the maintenance of 
such proceedings if it is found that the failure was occa- 
sioned by mistake, absence from the United Kingdom, 
or other reasonable cause. 

(2) Notice in respect of an injury under this act 
shall give the name and address of the person in- 
jured, and shall state in ordinary language the cause 
of the injury and the date at which the accident hap- 
pened, and shall be served on the employer, or, if 



APPENDIX 191 

there is more than one employer, upon one of such 
employers. 

(3) The notice may be served by delivering the same 
at, or sending it by post in a registered letter addressed 
to, the residence or place of business of the person on 
whom it is to be served. 

(4) Where the employer is a body of persons, cor- 
porate or unincorporate, the notice may also be served 
by delivering the same at, or by sending it by post in 
a registered letter addressed to, the employer at the 
office, or, if there be more than one office, any one of 
the offices of such body. 

3. — (1) If the registrar of friendly societies, after 
taking steps to ascertain the views of the employer and 
workmen, certifies that any scheme of compensation, 
benefit, or insurance for the workmen of an employer in 
any employment, whether or not such scheme includes 
other employers and their workmen, provides scales of 
compensation not less favorable to the workmen and 
their dependents than the corresponding scales con- 
tained in this act, and that, where the scheme provides 
for contributions by the workmen, the scheme confers 
benefits at least equivalent to those contributions, in 
addition to the benefits to which the workmen would 
have been entitled under this act, and that a majority 
(to be ascertained by ballot) of the workmen to whom 
the scheme is applicable are in favor of such scheme, 
the employer may, whilst the certificate is in force, con- 
tract with any of his workmen that the provisions of the 
scheme shall be substituted for the provisions of this 
act, and thereupon the employer shall be liable only in 
accordance with the scheme, but, save as aforesaid, this 
act shall apply notwithstanding any contract to the con- 
trary made after the commencement of this act. 



192 APPENDIX 

(2) The registrar may give a certificate to expire at 
the end of a limited period of not less than five years, 
and may from time to time renew with or without mod- 
ifications such a certificate to expire at the end of the 
period for which it is renewed. 

(3) No scheme shall be so certified which contains 
an obligation upon the workmen to join the scheme as 
a condition of their hiring, or which does not contain 
provisions enabling a workman to withdraw from the 
scheme. 

(4) If complaint is made to the registrar of friendly 
societies by or on behalf of the workmen of any em- 
ployer that the benefits conferred by any scheme no 
longer conform to the conditions stated in subsection 
(1) of this section, or that the provisions of such scheme 
are being violated, or that the scheme is not being fairly 
administered, or that satisfactory reasons exist for 
revoking the certificate, the registrar shall examine into 
the complaint, and, if satisfied that good cause exists for 
such complaint, shall, unless the cause of complaint is 
removed, revoke the certificate. 

(5) When a certificate is revoked or expires, any 
moneys or securities held for the purpose of the scheme 
shall, after due provision has been made to discharge 
the liabilities already accrued, be distributed as may be 
arranged between the employer and workmen, or as 
may be determined by the registrar of friendly societies 
in the event of a difference of opinion. 

(6) Whenever a scheme has been certified as afore- 
said, it shall be the duty of the employer to answer all 
such inquiries and to furnish all such accounts in regard 
to the scheme as may be made or required by the regis- 
trar of friendly societies. 

(7) The chief registrar of friendly societies shall 



APPENDIX 193 

include in his annual report the particulars of the pro- 
ceedings of the registrar under this act. 

(8) The chief registrar of friendly societies may 
make regulations for the purpose of carrying this sec- 
tion into effect. 

4. — (1) Where any person (in this section referred 
to as the principal), in the course of or for the purposes 
of his trade or business, contracts with any other person 
(in this section referred to as the contractor) for the 
execution by or under the contractor of the whole or 
any part of any work undertaken by the principal, the 
principal shall be liable to pay to any workman em- 
ployed in the execution of the work any compensation 
under this act which he would have been liable to pay 
if that workman had been immediately employed by 
him ; and where compensation is claimed from or pro- 
ceedings are taken against the principal, then, in the 
application of this act, references to the principal 
shall be substituted for references to the employer, 
except that the amount of compensation shall be cal- 
culated with reference to the earnings of the workman 
under the employer by whom he is immediately em- 
ployed : 

Provided that, where the contract relates to thresh- 
ing, plowing, or other agricultural work, and the con- 
tractor provides and uses machinery driven by mechan- 
ical power for the purpose of such work, he and he alone 
shall be liable under this act to pay compensation to any 
workman employed by him on such work. 

(2) Where the principal is liable to pay compensa- 
tion under this section, he shall be entitled to be in- 
demnified by any person who would have been liable to 
pay compensation to the workman independently of this 
section, and all questions as to the right to and amount 



194 APPENDIX 

of any such indemnity shall in default of agreement be 
settled by arbitration under this act. 

(3) Nothing in this section shall be construed as pre- 
venting a workman recovering compensation under this 
act from the contractor instead of the principal. 

(4) This section shall not apply in any case where 
the accident occurred elsewhere than on, or in, or about 
premises on which the principal has undertaken to exe- 
cute the work or which are otherwise under his control 
or management. 

5. — (1) Where any employer has entered into a 
contract with any insurers in respect of any liability 
under this act to any workman, then, in the event of the 
employer becoming bankrupt, or making a composi- 
tion or arrangement with his creditors, or if the em- 
ployer is a company in the event of the company having 
commenced to be wound up, the rights of the employer 
against the insurers as respects that liability shall, not- 
withstanding anything in the enactments relating to 
bankruptcy and the winding up of companies, be trans- 
ferred to and vest in the workman, and upon any such 
transfer the insurers shall have the same rights and 
remedies and be subject to the same liabilities as if they 
were the employer, so however that the insurers shall 
not be under any greater liability to the workman than 
they would have been under to the employer. 

(2) If the liability of the insurers to the workman is 
less than the liability of the employer to the workman, 
the workman may prove for the balance in the bank- 
ruptcy or liquidation. 

(3) There shall be included among the debts which, 
under section one of the Preferential Payments in 
Bankruptcy Act, 1888, and section four of the Preferen- 
tial Payments in Bankruptcy (Ireland) Act, 1889, are 



APPENDIX 195 

in the distribution of the property of a bankrupt and 
in the distribution of the assets of a company being 
wound up to be paid in priority to all other debts, the 
amount, not exceeding in any individual case one hun- 
dred pounds, due in respect of any compensation the 
liability wherefor accrued before the date of the receiv- 
ing order or the date of the commencement of the wind- 
ing up, and those acts and the Preferential Payments in 
Bankruptcy Amendment Act, 1897, shall have effect 
accordingly. Where the compensation is a weekly pay- 
ment, the amount due in respect thereof shall, for the 
purposes of this provision, be taken to be the amount 
of the lump sum for which the weekly payment could, 
if redeemable, be redeemed if the employer made an 
application for that purpose under the first schedule to 
this act. 

(4) In the case of the winding up of a company 
within the meaning of the Stannaries Act, 1887, such an 
amount as aforesaid, if the compensation is payable to 
a miner or the dependents of a miner, shall have the like 
priority as is conferred on wages of miners by section 
nine of that act, and that section shall have effect 
accordingly. 

(5) The provisions of< this section with respect to 
preferences and priorities shall not apply where the 
bankrupt or the company being wound up has entered 
into such a contract with insurers as aforesaid. 

(6) This section shall not apply where a company is 
wound up voluntarily merely for the purposes of recon- 
struction or of amalgamation with another company. 

6. Where the injury for which compensation is pay- 
able under this act was caused under circumstances 
creating a legal liability in some person other than the 
employer to pay damages in respect thereof — 



196 APPENDIX 

(1) The workman may take proceedings both against 
that person to recover damages and against any person 
liable to pay compensation under this act for such com- 
pensation, but shall not be entitled to recover both 
damages and compensation; and 

(2) If the workman has recovered compensation 
under this act, the person by whom the compensation 
was paid, and any person who has been called on to pay 
an indemnity under the section of this act relating to 
subcontracting, shall be entitled to be indemnified by 
the person so liable to pay damages as aforesaid, and 
all questions as to the right to and amount of any such 
indemnity shall, in default of agreement, be settled by 
action, or, by consent of the parties, by arbitration 
under this act. 

7. — (1) This act shall apply to masters, seamen, 
and apprentices to the sea service and apprentices in the 
sea-fishing service, provided that such persons are work- 
men within the meaning of this act, and are members 
of the crew of any ship registered in the United King- 
dom, or of any other British ship or vessel of which the 
owner, or (if there is more than one owner) the manag- 
ing owner, or manager resides or has his principal place 
of business in the United Kingdom, subject to the fol- 
lowing modifications : 

(a) The notice of accident and the claim for com- 
pensation may, except where the person injured is 
the master, be served on the master of the ship as if he 
were the employer, but where the accident happened 
and the incapacity commenced on board the ship it 
shall not be necessary to give any notice of the acci- 
dent; 

(6) In the case of the death of the master, seaman, or 
apprentice, the claim for compensation shall be made 



APPENDIX 197 

within six months after news of the death has been 
received by the claimant; 

(c) Where an injured master, seaman, or apprentice 
is discharged or left behind in a British possession or in 
a foreign country, depositions respecting the circum- 
stances and nature of the injury may be taken by any 
judge or magistrate in the British possession, and by 
any British consular officer in the foreign country, and 
if so taken shall be transmitted by the person by whom 
they are taken to the Board of Trade, and such deposi- 
tion or certified copies thereof shall in any proceedings 
for enforcing the claim be admissible in evidence as 
provided by sections six hundred and ninety-one and 
six hundred and ninety-five of the Merchant Shipping 
Act, 1894, and those sections shall apply accordingly; 

(d) In the case of the death of a master, seaman, or 
apprentice, leaving no dependents, no compensation 
shall be payable, if the owner of the ship is, under 
the Merchant Shipping Act, 1894, liable to pay the ex- 
penses of burial; 

(e) The weekly payment shall not be payable in 
respect of the period during which the owner of the ship 
is, under the Merchant Shipping Act, 1894, as amended 
by any subsequent enactment, or otherwise, liable to 
defray the expenses of maintenance of the injured 
master, seaman, or apprentice; 

(/) Any sum payable by way of compensation by the 
owner of a ship under this act shall be paid in full not- 
withstanding anything in section Hve hundred and three 
of the Merchant Shipping Act, 1894 (which relates to 
the limitation of a shipowner's liability in certain cases 
of loss of life, injury, or damage), but the limitation on 
the owner's liability imposed by that section shall apply 
to the amount recoverable by way of indemnity under 



198 APPENDIX 

the section of this act relating to remedies both against 
employer and stranger as if the indemnity were dam- 
ages for loss of life or personal injury; 

(g) Subsections (2) and (3) of section one hundred 
and seventy-four of the Merchant Shipping Act, 1894 
(which relates to the recovery of wages of seamen lost 
with their ship), shall apply as respects proceedings for 
the recovery of compensation by dependents of masters, 
seamen, and apprentices lost with their ship as they 
apply with respect to proceedings for the recovery of 
wages due to seamen and apprentices ; and proceedings 
for the recovery of compensation shall in such a case 
be maintainable if the claim is made within eighteen 
months of the date at which the ship is deemed to have 
been lost with all hands. 

(2) This act shall not apply to such members of the 
crew of a fishing vessel as are remunerated by shares in 
the profits or the gross earnings of the working of such 
vessel. 

(3) This section shall extend to pilots to whom Part 
X of the Merchant Shipping Act, 1894, applies, as if a 
pilot when employed on any such ship as aforesaid were 
a seaman and a member of the crew. 

8. — (1) Where — 

(i) The certifying surgeon appointed under the Fac- 
tory and Workshop Act, 1901, for the district in which 
a workman is employed certifies that the workman is 
suffering from a disease mentioned in the third schedule 
to this act and is thereby disabled from earning full 
wages at the work at which he was employed ; or 

(it) A workman is, in pursuance of any special rules 
or regulations made under the Factory and Workshop 
Act, 1901, suspended from his usual employment on 
account of having contracted any such disease ; or 



APPENDIX 199 

(iii) The death of a workman is caused by any such 
disease ; 

and the disease is due to the nature of any employment 
in which the workman was employed at any time 
within the twelve months previous to the date of the 
disablement or suspension, whether under one or more 
employers, he or his dependents shall be entitled to 
compensation under this act as if the disease or such 
suspension as aforesaid were a personal injury by ac- 
cident arising out of and in the course of that employ- 
ment, subject to the following modifications : 

(a) The disablement or suspension shall be treated 
as the happening of the accident; 

(6) If it is proved that the workman has at the time 
of entering the employment willfully and falsely repre- 
sented himself in writing as not having previously suf- 
fered from the disease, compensation shall not be 
payable ; 

(c) The compensation shall be recoverable from the 
employer who last employed the workman during the 
said twelve months in the employment to the nature of 
which the disease was due : 

Provided that — 

(i) The workman or his dependents if so required 
shall furnish that employer with such information as to 
the names and addresses of all other employers who 
employed him in the employment during the said 
twelve months as he or they may possess, and, if such 
information is not furnished, or is not sufficient to 
enable that employer to take proceedings under the 
next following proviso, that employer upon proving 
that the disease was not contracted whilst the workman 
was in his employment shall not be liable to pay com- 
pensation; and 



200 APPENDIX 

(ii) If that employer alleges that the disease was in 
fact contracted whilst the workman was in the employ- 
ment of some other employer, and not whilst in his 
employment, he may join such other employer as a 
party to the arbitration, and if the allegation is proved 
that the other employer shall be the employer from 
whom the compensation is to be recoverable; and 

(Hi) If the disease is of such a nature as to be con- 
tracted by a gradual process, any other employers who 
during the said twelve months employed the workman 
in the employment to the nature of which the disease 
was due shall be liable to make to the employer from 
whom compensation is recoverable such contributions 
as, in default of agreement, may be determined in the 
arbitration under this act for settling the amount of 
the compensation ; 

(d) The amount of the compensation shall be cal- 
culated with reference to the earnings of the workman 
under the employer from whom the compensation is 
recoverable ; 

(e) The employer to whom notice of the death, dis- 
ablement, or suspension is to be given shall be the 
employer who last employed the workman during the 
said twelve months in the employment to the nature of 
which the disease was due, and the notice may be given 
notwithstanding that the workman has voluntarily left 
his employment; 

(f) If an employer or a workman is aggrieved by the 
action of a certifying or other surgeon in giving or refus- 
ing to give a certificate of disablement or in suspending 
or refusing to suspend a workman for the purposes of 
this section, the matter shall in accordance with regula- 
tions made by the secretary of state be referred to a 
medical referee, whose decision shall be final. 



APPENDIX 201 

(2) If the workman at or immediately before the date 
of the disablement or suspension was employed in any 
process mentioned in the second column of the third 
schedule to this act, and the disease contracted is the 
disease in the first column of that schedule set opposite 
the description of the process, the disease, except where 
the certifying surgeon certifies that in his opinion the 
disease was not due to the nature of the employment, 
shall be deemed to have been due to the nature of that 
employment, unless the employer proves the contrary. 

(3) The secretary of state may make rules regulating 
the duties and fees of certifying and other surgeons 
(including dentists) under this section. 

(4) For the purposes of this section the date of dis- 
ablement shall be such date as the certifying surgeon 
certifies as the date on which the disablement com- 
menced, or, if he is unable to certify such a date, the 
date on which the certificate is given : 

Provided that — 

(a) Where the medical referee allows an appeal 
against a refusal by a certifying surgeon to give a certi- 
ficate of disablement, the date of disablement shall be 
such date as the medical referee may determine; 

(b) Where a workman dies without having obtained 
a certificate of disablement, or is at the time of death 
not in receipt of a weekly payment on account of dis- 
ablement, it shall be the date of death. 

, (5) In such cases, and subject to such conditions as 
the secretary of state may direct, a medical practitioner 
appointed by the secretary of state for the purpose shall 
have the powers and duties of a certifying surgeon under 
this section, and this section shall be construed accord- 
ingly. 

(6) The secretary of state may make orders for 



202 APPENDIX 

extending the provisions of this section to other diseases 
and other processes, and to injuries due to the nature of 
any employment specified in the order not being injuries 
by accident, either without modification or subject to 
such modifications as may be contained in the order. 

(7) Where, after inquiry held on the application of 
any employers or workmen engaged in any industry to 
which this section applies, it appears that a mutual 
trade insurance company or society for insuring against 
risks under this section has been established for the 
industry, and that a majority of the employers engaged 
in that industry are insured against such risks in the 
company or society and that the company or society 
consents, the secretary of state may, by provisional 
order, require all employers in that industry to insure 
in the company or society upon such terms and under 
such conditions and subject to such exceptions as may 
be set forth in the order. Where such a company or so- 
ciety has been established, but is confined to employers 
in any particular locality or of any particular class, the 
secretary of state may for the purposes of this provision 
treat the industry, as carried on by employers in that 
locality or of that class, as a separate industry. 

(8) A provisional order made under this section shall 
be of no force whatever unless and until it is confirmed 
by Parliament, and if, while the bill confirming any 
such order is pending in either House of Parliament, a 
petition is presented against the order, the bill may be 
referred to a select committee, and the petitioner shall 
be allowed to appear and oppose as in the case of pri- 
vate bills, and any act confirming any provisional order 
under this section may be repealed, altered, or amended 
by a provisional order made and confirmed in like 
manner. 



APPENDIX 203 

(9) Any expenses incurred by the secretary of state 
in respect of any such order, provisional order, or con- 
firming bill shall be defrayed out of moneys provided by 
Parliament. 

(10) Nothing in this section shall affect the rights 
of a workman to recover compensation in respect of 
a disease to which this section does not apply, if the 
disease is a personal injury by accident within the 
meaning of this act. 

9. — (1) This act shall not apply to persons in the 
naval or military service of the Crown, but otherwise 
shall apply to workmen employed by or under the 
Crown to whom this act would apply if the employer 
were a private person : 

Provided that in the case of a person employed in the 
private service of the Crown, the head of that depart- 
ment of the royal household in which he was employed 
at the time of the accident shall be deemed to be his 
employer. 

(2) The treasury may, by warrant laid before Parlia- 
ment, modify for the purposes of this act their warrant 
made under section one of the Superannuation Act, 
1887, and notwithstanding anything in that act, or any 
such warrant, may frame schemes with a view to their 
being certified by the registrar of friendly societies 
under this act. 

10. — (1) The secretary of state may appoint such 
legally qualified medical practitioners to be medical 
referees for the purposes of this act as he may, with the 
sanction of the treasury, determine, and the remunera- 
tion of, and other expenses incurred by, medical 
referees under this act shall, subject to regulations made 
by the treasury, be paid out of moneys provided by 
Parliament. 



204 APPENDIX 

Where a medical referee has been employed as a 
medical practitioner in connection with any case by 
or on behalf of an employer or workman or by any 
insurers interested, he shall not act as medical referee 
in that case. 

(2) The remuneration of an arbitrator appointed by 
a judge of county courts under the second schedule to 
this act shall be paid out of moneys provided by Parlia- 
ment in accordance with regulations made by the 
treasury. 

11. — (1) If it is alleged that the owners of any ship 
are liable as such owners to pay compensation under 
this act, and at any time that ship is found in any port 
or river of England or Ireland, or within three miles of 
the coast thereof, a judge of any court of record in Eng- 
land or Ireland may, upon its being shown to him by 
any person applying in accordance with the rules of the 
court that the owners are probably liable as such to pay 
such compensation, and that none of the owners reside 
in the United Kingdom, issue an order directed to any 
officer of customs or other officer named by the judge 
requiring him to detain the ship until such time as the 
owners, agent, master, or consignee thereof have paid 
such compensation, or have given security, to be ap- 
proved by the judge, to abide the event of any proceed- 
ings that may be instituted to recover such compensa- 
tion and to pay such compensation and costs as may be 
awarded thereon ; and any officer of customs or other 
officer to whom the order is directed shall detain the 
ship accordingly. 

(2) In any legal proceeding to recover such com- 
pensation, the person giving security shall be made 
defendant, and the production of the order of the 
judge, made in relation to the security, shall be con- 



APPENDIX 205 

elusive evidence of the liability of the defendant to the 
proceeding. 

(3) Section six hundred and ninety-two of the Mer- 
chant Shipping Act, 1894, shall apply to the detention 
of a ship under this act as it applies to the detention of a 
ship under that act, and, if the owner of a ship is a cor- 
poration, it shall for the purposes of this section be 
deemed to reside in the United Kingdom if it has an 
office in the United Kingdom at which service of writs 
can be effected. 

12. — (1) Every employer in any industry to which 
the secretary of state may direct that this section shall 
apply shall, on or before such day in every year as the 
secretary of state may direct, send to the secretary of 
state a correct return specifying the number of injuries 
in respect of which compensation has been paid by him 
under this act during the previous year, and the amount 
of such compensation, together with such other particu- 
lars as to the compensation as the secretary of state 
may direct, and in default of complying with this sec- 
tion shall be liable on conviction under the Summary 
Jurisdiction Acts to a fine not exceeding five pounds 
[$24.33]. 

(2) Any regulations made by the secretary of state 
containing such directions as aforesaid shall be laid 
before both Houses of Parliament as soon as may be 
after they are made. 

13. In this act, unless the context otherwise re- 
quires, — 

" Employer" includes any body of persons corporate 
or unincorporate and the legal personal representative 
of a deceased employer, and, where the services of a 
workman are temporarily lent or let on hire to another 
person by the person with whom the workman has en- 



206 APPENDIX 

tered into a contract of service or apprenticeship, the 
latter shall, for the purposes of this act, be deemed to 
continue to be the employer of the workman whilst 
he is working for that other person ; 

" Workman" does not include any person employed 
otherwise than by way of manual labor whose remuner- 
ation exceeds two hundred and fifty pounds [$1216.0*3] 
a year, or a person whose employment is of a casual 
nature and who is employed otherwise than for the pur- 
poses of the employer's trade or business, or a member 
of a police force, or an outworker, or a member of the 
employer's family dwelling in his house, but, save as 
aforesaid, means any person who has entered into or 
works under a contract of service or apprenticeship 
with an employer, whether by way of manual labor, 
clerical work, or otherwise, and whether the contract is 
expressed or implied, is oral or in writing; 

Any reference to a workman who has been injured 
shall, where the workman is dead, include a reference 
to his legal personal representative or to his dependents 
or other person to whom or for whose benefit compensa- 
tioo is payable; 

"Dependents" means such of the members of the 
workman's family as were wholly or in part dependent 
upon the earnings of the workman at the time of his 
death, or would but for the incapacity due to the acci- 
dent have been so dependent, and where the workman, 
being the parent or grandparent of an illegitimate child, 
leaves such a child so dependent upon his earnings, or, 
being an illegitimate child, leaves a parent or grand- 
parent so dependent upon his earnings, shall include 
such an illegitimate child and parent or grandparent 
respectively ; 

"Member of a family" means wife or husband, 



APPENDIX 207 

father, mother, grandfather, grandmother, stepfather, 
stepmother, son, daughter, grandson, granddaughter, 
stepson, stepdaughter, brother, sister, half-brother, 
half-sister ; 

"Ship," " vessel," " seaman," and "port" have the 
same meanings as in the Merchant Shipping Act, 1894 ; 

" Manager," in relation to a ship, means the ship's 
husband or other person to whom the management of 
the ship is entrusted by or on behalf of the owner; 

"Police force" means a police force to which the 
Police Act, 1890, or the Police (Scotland) Act, 1890, 
applies, the City of London Police Force, the Royal 
Irish Constabulary, and the Dublin Metropolitan 
Police Force; 

"Outworker" means a person to whom articles or 
materials are given out to be made up, cleaned, washed, 
altered, ornamented, finished, or repaired, or adapted 
for sale, in his own home or on other premises not under 
the control or management of the person who gave 
out the materials or articles ; 

The exercise and performance of the powers and 
duties of a local or other public authority shall, for the 
purposes of this act, be treated as the trade or business 
of the authority; 

"County court," "judge of the county court," 
" registrar of the county court," " plaintiff," and " rules 
of court," as respects Scotland, mean respectively sheriff 
court, sheriff, sheriff clerk, pursuer, and act of sederunt. 

14. In Scotland, where a workman raises an action 
against his employer independently of this act in respect 
of any injury caused by accident arising out of and in 
the course of the employment, the action, if raised 
in the sheriff court and concluding for damages under 
the Employers' Liability Act, 1880, or alternatively at 



208 APPENDIX 

common law or under the Employers' Liability Act, 
1880, shall, notwithstanding anything contained in that 
act, not be removed under that act or otherwise to the 
court of session, nor shall it be appealed to that court 
otherwise than by appeal on a question of law ; and for 
the purposes of such appeal the provisions of the 
second schedule to this act in regard to an appeal from 
the decision of the sheriff on any question of law de- 
termined by him as arbitrator under this act shall 
apply. 

15. — (1) Any contract (other than a contract sub- 
stituting the provisions of a scheme certified under the 
Workmen's Compensation Act, 1897, for the provisions 
of that act) existing at the commencement of this act, 
whereby a workman relinquishes any right to compen- 
sation from the employer for personal injury arising 
out of and in the course of his employment, shall not, 
for the purposes of this act, be deemed to continue 
after the time at which the workman's contract of 
service would determine if notice of the determina- 
tion thereof were given at the commencement of this 
act. 

(2) Every scheme under the Workmen's Compen- 
sation Act, 1897, in force at the commencement of this 
act shall, if recertified by the registrar of friendly socie- 
ties, have effect as if it were a scheme under this act. 

(3) The registrar shall recertify any such scheme if 
it is proved to his satisfaction that the scheme con- 
forms, or has been so modified as to conform, with the 
provisions of this act as to schemes. 

(4) If any such scheme has not been so recertified 
before the expiration of six months from the com- 
mencement of this act, the certificate thereof shall be 
revoked. 



APPENDIX 209 

16. — (1) This act shall come into operation on the 
first day of July, nineteen hundred and seven, but, 
except so far as it relates to references to medical 
referees, and proceedings consequential thereon, shall 
not apply in any case where the accident happened 
before the commencement of this act. 

(2) The Workmen's Compensation Acts, 1897 and 
1900, are hereby repealed, but shall continue to apply 
to cases where the accident happened before the com- 
mencement of this act, except to the extent to which 
this act applies to those cases. 

17. This act may be cited as the Workmen's Com- 
pensation Act, 1906. 

FIRST SCHEDULE 

Scale and Conditions of Compensation 
(1) The amount of compensation under this act shall 
be — 

(a) Where death results from the injury — 
(i) If the workman leaves any dependents wholly 
dependent upon his earnings, a sum equal to his earn- 
ings in the employment of the same employer during 
the three years next preceding the injury, or the sum of 
one hundred and fifty pounds [$729.98], whichever of 
those sums is the larger, but not exceeding in any case 
three hundred pounds [$1459.95], provided that the 
amount of any weekly payments made under this act, 
and any lump sum paid in redemption thereof, shall be 
deducted from such sum, and, if the period of the work- 
man's employment by the said employer has been less 
than the said three years, then the amount of his earn- 
ings during the said three years shall be deemed to be 
one hundred and fifty-six times his average weekly 



210 APPENDIX 

earnings during the period of his actual employment 
under the said employer; 

(ii) If the workman does not leave any such de- 
pendents, but leaves any dependents in part dependent 
upon his earnings, such sum, not exceeding in any case 
the amount payable under the foregoing provisions, as 
may be agreed upon, or, in default of agreement, may 
be determined, on arbitration under this act, to be 
reasonable and proportionate to the injury to the said 
dependents; and 

(in) If he leaves no dependents, the reasonable ex- 
penses of his medical attendance and burial, not 
exceeding ten pounds [$48.67]; 

(6) Where total or partial incapacity for work results 
from the injury, a weekly payment during the incapac- 
ity not exceeding fifty per cent of his average weekly 
earnings during the previous twelve months, if he has 
been so long employed, but if not, then for any less 
period during which he has been in the employment of 
the same employer, such weekly payment not to exceed 
one pound [$4.87]; 

Provided that — 

(a) If the incapacity lasts less than two weeks no 
compensation shall be payable in respect of the first 
week; and 

(6) As respects the weekly payments during total 
incapacity of a workman who is under twenty-one 
years of age at the date of the injury, and whose aver- 
age weekly earnings are less than twenty shillings 
[$4.87], one hundred per cent shall be substituted for 
fifty per cent of his average weekly earnings, but the 
weekly payment shall in no case exceed ten shillings 
[$2.43]. 

(2) For the purposes of the provisions of this sched- 



APPENDIX 211 

ule relating to "earnings" and "average weekly earn- 
ings" of a workman, the following rules shall be 
observed : 

(a) Average weekly earnings shall be computed in 
such manner as is best calculated to give the rate per 
week at which the workman was being remunerated. 
Provided that where by reason of the shortness of the 
time during which the workman has been in the em- 
ployment of his employer, or the casual nature of the 
employment, or the terms of the employment, it is 
impracticable at the date of the accident to compute 
the rate of remuneration, regard may be had to the 
average weekly amount which, during the twelve 
months previous to the accident, was being earned by 
a person in the same grade employed at the same work 
by the same employer, or, if there is no person so em- 
ployed, by a person in the same grade employed in the 
same class of employment and in the same district ; 

(b) Where the workman had entered into concurrent 
contracts of service with two or more employers under 
which he worked at one time for one such employer and 
at another time for another such employer, his average 
weekly earnings shall be computed as if his earnings 
under all such contracts were earnings in the employ- 
ment of the employer for whom he was working at the 
time of the accident ; 

(c) Employment by the same employer shall be taken 
to mean employment by the same employer in the grade 
in which the workman was employed at the time of the 
accident, uninterrupted by absence from work due to 
illness or any other unavoidable cause; 

(d) Where the employer has been accustomed to pay 
to the workman a sum to cover any special expenses 
entailed on him by the nature of his employment, the 



212 APPENDIX 

sum so paid shall not be reckoned as part of the 
earnings. 

(3) In fixing the amount of the weekly payment, 
regard shall be had to any payment, allowance, or bene- 
fit which the workman may receive from the employer 
during the period of his incapacity, and in the case of 
partial incapacity the weekly payment shall in no case 
exceed the difference between the amount of the aver- 
age weekly earnings of the workman before the accident 
and the average weekly amount which he is earning or 
is able to earn in some suitable employment or business 
after the accident, but shall bear such relation to the 
amount of that difference as under the circumstances 
of the case may appear proper. 

(4) Where a workman has given notice of an acci- 
dent, he shall, if so required by the employer, submit 
himself for examination by a duly qualified medical 
practitioner provided and paid by the employer, and, 
if he refuses to submit himself to such examination, or 
in any way obstructs the same, his right to compensa- 
tion, and to take or prosecute any proceeding under this 
act in relation to compensation, shall be suspended until 
such examination has taken place. 

(5) The payment in the case of death shall, unless 
otherwise ordered as hereinafter provided, be paid into 
the county court, and any sum so paid into court shall, 
subject to rules of court and the provisions of this 
schedule, be invested, applied, or otherwise dealt with 
by the court in such manner as the court in its discre- 
tion thinks fit for the benefit of the persons entitled 
thereto under this act, and the receipt of the registrar 
of the court shall be a sufficient discharge in respect of 
the amount paid in : 

Provided that, if so agreed, the payment in case of 



APPENDIX 213 

death shall, if the workman leaves no dependents, be 
made to his legal personal representative, or, if he has 
no such representative, to the person to whom the ex- 
penses of medical attendance and burial are due. 

(6) Rules of court may provide for the transfer of 
money paid into court under this act from one court to 
another, whether or not the court from which it is to be 
transferred is in the same part of the United Kingdom 
as the court to which it is to be transferred. 

(7) Where a weekly payment is possible under this 
act to a person under any legal disability, a county 
court may, on application being made in accordance 
with rules of court, order that the weekly payment be 
paid during the disability into court, and the provisions 
of this schedule with respect to sums required by this 
schedule to be paid into court shall apply to sums paid 
into court in pursuance of any such order. 

(8) Any question as to who is a dependent shall, in 
default of agreement, be settled by arbitration under 
this act, or, if not so settled before payment into court 
under this schedule, shall be settled by the county court, 
and the amount payable to each dependent shall be set- 
tled by arbitration under this act, or, if not so settled 
before payment into court under this schedule, by the 
county court. Where there are both total and partial 
dependents nothing in this schedule shall be construed 
as preventing the compensation being allotted partly to 
the total and partly to the partial dependents. 

(9) Where, on application being made in accordance 
with rules of court, it appears to a county court that, 
on account of neglect of children on the part of a widow, 
or on account of the variation of the circumstances of 
the various dependents, or for any other sufficient 
cause, an order of the court or an award as to the appor- 



214 APPENDIX 

tionment amongst the several dependents of any sum 
paid as compensation, or as to the manner in which any 
sum payable to any such dependent is to be invested, 
applied, or otherwise dealt with, ought to be varied, 
the court may make such order for the variation of the 
former order or the award, as in the circumstances of 
the case the court may think just. 

(10) Any sum which under this schedule is ordered 
to be invested may be invested in whole or in part in the 
Post Office Savings Bank by the registrar of the county 
court in his name as registrar. 

(11) Any sum to be so invested may be invested in 
the purchase of an annuity from the national debt 
commissioners through the Post Office Savings Bank, 
or be accepted by the postmaster-general as a deposit 
in the name of the registrar as such, and the provisions 
of any statute or regulations respecting the limits of 
deposits in savings banks, and the declaration to be 
made by a depositor, shall not apply to such sums. 

(12) No part of any money invested in the name of 
the registrar of any county court in the Post Office 
Savings Bank under this act shall be paid out, except 
upon authority addressed to the postmaster-general by 
the treasury or, subject to regulations of the treasury, 
by the judge or registrar of the county court. 

(13) Any person deriving any benefit from any 
moneys invested in a post office savings bank under the 
provisions of this act may, nevertheless, open an account 
in a post office savings bank or in any other savings 
bank in his own name without being liable to any 
penalties imposed by any statute or regulations in 
respect of the opening of accounts in two savings banks, 
or of two accounts in the same savings bank. 

(14) Any workman receiving weekly payments under 



APPENDIX 215 

this act shall, if so required by the employer, from time 
to time submit himself for examination by a duly quali- 
fied medical practitioner provided and paid by the 
employer. If the workman refuses to submit himself to 
such examination, or in any way obstructs the same, 
his right to such weekly payments shall be suspended 
until such examination has taken place. 

(15) A workman shall not be required to submit 
himself for examination by a medical practitioner under 
paragraph (4) or paragraph (14) of this schedule other- 
wise than in accordance with regulations made by the 
secretary of state, or at more frequent intervals than 
may be prescribed by those regulations. 

Where a workman has so submitted himself for 
examination by a medical practitioner, or has been 
examined by a medical practitioner selected by himself, 
and the employer or the workman, as the case may be, 
has within six days after such examination furnished the 
other with a copy of the report of that practitioner as to 
the workman's condition, then, in the event of no agree- 
ment being come to between the employer and the 
workman as to the workman's condition or fitness for 
employment, the registrar of a county court, on appli- 
cation being made to the court by both parties, may, on 
payment by the applicants of such fee not exceeding 
one pound [$4.87] as may be prescribed, refer the mat- 
ter to a medical referee. 

The medical referee to whom the matter is so 
referred shall, in accordance with regulations made by 
the secretary of state, give a certificate as to the condi- 
tion of the workman and his fitness for employment, 
specifying, where necessary, the kind of employment 
for which he is fit, and that certificate shall be con- 
clusive evidence as to the matters so certified. 



216 APPENDIX 

Where no agreement can be come to between the 
employer and the workman as to whether or to what 
extent the incapacity of the workman is due to the ac- 
cident, the provisions of this paragraph shall, subject 
to any regulations made by the secretary of state, apply 
as if the question were a question as to the condition of 
the workman. 

If a workman, on being required so to do, refuses to 
submit himself for examination by a medical referee to 
whom the matter has been so referred as aforesaid, or 
in anyway obstructs the same, his right to compensation 
and to take or prosecute any proceeding under this act 
in relation to compensation, or, in the case of a work- 
man in receipt of a weekly payment, his right to that 
weekly payment, shall be suspended until such examin- 
ation has taken place. 

Rules of court may be made for prescribing the man- 
ner in which documents are to be furnished or served 
and applications made under this paragraph and the 
forms to be used for those purposes and, subject to the 
consent of the treasury, as to the fee to be paid under 
this paragraph. 

(16) Any weekly payment may be reviewed at the 
request either of the employer or of the workman, and 
on such review may be ended, diminished, or increased, 
subject to the maximum above provided, and the 
amount of payment shall, in default of agreement, be 
settled by arbitration under this act : 

Provided that where the workman was at the date of 
the accident under twenty-one years of age and the 
review takes place more than twelve months after the 
accident, the amount of the weekly payment may be 
increased to any amount not exceeding fifty per cent of 
the weekly sum which the workman would probably 



APPENDIX 217 

have been earning at the date of the review if he had 
remained uninjured, but not in any case exceeding one 
pound [$4.87]. 

(17) Where any weekly payment has been continued 
for not less than six months, the liability therefor may, 
on application by or on behalf of the employer, be 
redeemed by the payment of a lump sum of such an 
amount as, where the incapacity is permanent, would, 
if invested in the purchase of an immediate life annuity 
from the national debt commissioners through the Post 
Office Savings Bank, purchase an annuity for the work- 
man equal to seventy-five per cent of the annual value 
of the weekly payment, and as in any other case may be 
settled by arbitration under this act, and such lump sum 
may be ordered by the committee or arbitrator or judge 
of the county court to be invested or otherwise applied 
for the benefit of the person entitled thereto : Provided 
that nothing in this paragraph shall be construed as 
preventing agreements being made for the redemption 
of a weekly payment by a lump sum. 

(18) If a workman receiving a weekly payment, 
ceases to reside in the United Kingdom, he shall there- 
upon cease to be entitled to receive any weekly payment 
unless the medical referee certifies that the incapacity 
resulting from the injury is likely to be of a permanent 
nature. If the medical referee so certifies, the workman 
shall be entitled to receive quarterly the amount of the 
weekly payments accruing due during the preceding 
quarter so long as he proves, in such manner and at 
such intervals as may be prescribed by rules of court, 
his identity and the continuance of the incapacity in 
respect of which the weekly payment is payable. 

(19) A weekly payment, or a sum paid by way of 
redemption thereof, shall not be capable of being 



218 APPENDIX 

assigned, charged, or attached, and shall not pass to 
any other person by operation of law, nor shall any 
claim be set off against the same. 

(20) Where under this schedule a right to compensa- 
tion is suspended no compensation shall be payable in 
respect of the period of suspension. 

(21) Where a scheme certified under this act pro- 
vides for payment of compensation by a friendly so- 
ciety, the provisions of the proviso to the first sub- 
section of section eight, section sixteen, and section 
forty-one of the Friendly Societies Act, 1896, shall not 
apply to such society in respect of such scheme. 

(22) In the application of this act to Ireland the pro- 
visions of the County Officers and Courts (Ireland) 
Act, 1877, with respect to money deposited in the Post 
Office Savings Bank under that act shall apply to 
money invested in the Post Office Savings Bank under 
this act. 

SECOND SCHEDULE 
Arbitration, etc. 

(1) For the purpose of settling any matter which 
under this act is to be settled by arbitration, if any com- 
mittee, representative of any employer and his work- 
men, exists with power to settle matters under this act 
in the case of the employer and workmen, the matter 
shall, unless either party objects by notice in writing 
sent to the other party before the committee meet to 
consider the matter, be settled by the arbitration of such 
committee, or be referred by them in their discretion to 
arbitration as hereinafter provided. 

(2) If either party so objects, or there is no such 
committee, or the committee so refers the matter or 
fails to settle the matter within six months from the 



APPENDIX 219 

date of the claim, the matter shall be settled by a single 
arbitrator agreed on by the parties, or in the absence of 
agreement by the judge of the county court, according 
to the procedure prescribed by rules of court. 

(3) In England the matter, instead of being settled 
by the judge of the county court, may, if the lord chan- 
cellor so authorizes, be settled according to the like 
procedure, by a single arbitrator appointed by that 
judge, and the arbitrator so appointed shall, for the 
purposes of this act, have all the powers of that 
judge. 

(4) The Arbitration Act, 1889, shall not apply to any 
arbitration under this act ; but a committee or an arbi- 
trator may, if they or he think fit, submit any question 
of law for the decision of the judge of the county court, 
and the decision of the judge on any question of law, 
either on such submission, or in any case where he him- 
self settles the matter under this act, or where he gives 
any decision or makes any order under this act, shall be 
final, unless within the time and in accordance with the 
conditions prescribed by rules of the Supreme Court 
either party appeals to the court of appeal; and the 
judge of the county court, or the arbitrator appointed 
by him, shall, for the purpose of proceedings under this 
act, have the same powers of procuring the attendance 
of witnesses and the production of documents as if the 
proceedings were an action in the county court. 

(5) A judge of county courts may, if he thinks fit, 
summon a medical referee to sit with him as an assessor. 

(6) Rules of court may make provision for the ap- 
pearance in any arbitration under this act of any party 
by some other person. 

(7) The costs of and incidental to the arbitration and 
proceedings connected therewith shall be in the discre- 



220 APPENDIX 

tion of the committee, arbitrator, or judge of the county 
court, subject as respects such judge and an arbitrator 
appointed by him to rules of court. The costs, whether 
before a committee or an arbitrator or in the county 
court, shall not exceed the limit prescribed by rules of 
court, and shall be taxed in manner prescribed by those 
rules and such taxation may be reviewed by the judge 
of the county court. 

(8) In the case of the death, or refusal or inability to 
act, of an arbitrator, the judge of the county court may, 
on the application of any party, appoint a new arbi- 
trator. 

(9) Where the amount of compensation under this 
act has been ascertained, or any weekly payment varied, 
or any other matter decided under this act, either by a 
committee or by an arbitrator or by agreement, a mem- 
orandum thereof shall be sent, in manner prescribed by 
rules of court, by the committee or arbitrator, or by any 
party interested, to the registrar of the county court who 
shall, subject to such rules, on being satisfied as to its 
genuineness, record such memorandum in a special 
register without fee, and thereupon the memorandum 
shall for all purposes be enforceable as a county court 
judgment. 

Provided that — 

(a) No such memorandum shall be recorded before 
seven days after the dispatch by the registrar of notice 
to the parties interested ; and 

(b) Where a workman. seeks to record a memoran- 
dum of agreement between his employer and himself 
for the payment of compensation under this act and the 
employer, in accordance with rules of court, proves that 
the workman has in fact returned to work and is earn- 
ing the same wages as he did before the accident, and 



APPENDIX 221 

objects to the recording of such memorandum, the 
memorandum shall only be recorded, if at all, on such 
terms as the judge of the county court, under the cir- 
cumstances, may think just ; and 
' (c) The judge of the county court may at any time 
rectify the register; and 

(d) Where it appears to the registrar of the county 
court, on any information which he considers sufficient, 
that an agreement as to the redemption of a weekly pay- 
ment by a lump sum, or an agreement as to the amount 
of compensation payable to a person under any legal 
disability, or to dependents, ought not to be registered 
by reason of the inadequacy of the sum or amount, or 
by reason of the agreement having been obtained by 
fraud or undue influence, or other improper means, he 
may refuse to record the memorandum of the agree- 
ment sent to him for registration ; and refer the matter 
to the judge, who shall, in accordance with rules of 
court, make such order (including an order as to any 
sum already paid under the agreement) as under the 
circumstances he may think just; and 

(e) The judge may, within six months after a memo- 
randum of an agreement as to the redemption of a 
weekly payment by a lump sum, or of an agreement as 
to the amount of compensation payable to a person 
under any legal disability, or to dependents, has been 
recorded in the register, order that the record be 
removed from the register on proof to his satisfaction 
that the agreement was obtained by fraud or undue 
influence or other improper means, and may make such 
order (including an order as to any sum already paid 
under the agreement) as under the circumstances he 
may think just. 

(10) An agreement as to the redemption of a weekly 



222 APPENDIX 

payment by a lump sum if not registered in accordance 
with this act shall not, nor shall the payment of the sum 
payable under the agreement, exempt the person by 
whom the weekly payment is payable from liability to 
continue to make that weekly payment, and an agree- 
ment as to the amount of compensation to be paid to a 
person under a legal disability or to dependents, if not 
so registered, shall not, nor shall the payment of the sum 
payable under the agreement, exempt the person by 
whom the compensation is payable from liability to pay 
compensation, unless, in either case, he proves that the 
failure to register was not due to any neglect or default 
on his part. 

(11) Where any matter under this act is to be done in 
a county court, or by, to, or before the judge or regis- 
trar of a county court, then, unless the contrary inten- 
tion appear, the same shall, subject to rules of court, be 
done in, or by, to, or before the judge or registrar of the 
county court of the district in which all the parties con- 
cerned reside, or if they reside in different districts the 
district prescribed by rules of court, without prejudice 
to any transfer in manner provided by rules of court. 

(12) The duty of a judge of county courts under this 
act, or in England of an arbitrator appointed by him, 
shall, subject to rules of court, be part of the duties of 
the county court, and the officers of the court shall act 
accordingly, and rules of court may be made both for 
any purpose for which this act authorizes rules of court 
to be made, and also generally for carrying into effect 
this act so far as it affects the county court, or an arbi- 
trator appointed by the judge of the county court, and 
proceedings in the courrty court or before any such arbi- 
trator, and such rules may, in England, be made by the 
five judges of county courts appointed for the making 



APPENDIX 223 

of rules under section one hundred and sixty-four of the 
County Courts Act, 1888, and when allowed by the lord 
chancellor, as provided by that section, shall have full 
effect without any further consent. 

(13) No court fee, except such as may be prescribed 
under paragraph (15) of the first schedule to this act, 
shall be payable by any party in respect of any pro- 
ceedings by or against a workman under this act in the 
court prior to the award. 

(14) Any sum awarded as compensation shall, unless 
paid into court under this act, be paid on the receipt of 
the person to whom it is payable under any agreement 
or award, and the solicitor or agent of a person claiming 
compensation under this act shall not be entitled to 
recover from him any costs in respect of any proceed- 
ings in an arbitration under this act, or to claim a lien 
in respect of such costs on, or deduct such costs from, 
the sum awarded or agreed as compensation, except 
such sum as may be awarded by the committee, the 
arbitrator, or the judge of the county court, on an appli- 
cation made either by the person claiming compensa- 
tion, or by his solicitor or agent, to determine the 
amount of costs to be paid to the solicitor or agent, such 
sum to be awarded subject to taxation and to the scale 
of costs prescribed by rules of court. 

(15) Any committee, arbitrator, or judge may, sub- 
ject to regulations made by the secretary of state and 
the treasury, submit to a medical referee for report any 
matter which seems material to any question arising in 
the arbitration. 

(16) The secretary of state may, by order, either 
unconditionally or subject to such conditions or modi- 
fications as he may think fit, confer on any committee 
representative of an employer and his workmen, as 



224 APPENDIX 

respects any matter in which the committee act as arbi- 
trators, or which is settled by agreement submitted to 
and approved by the committee, all or any of the powers 
conferred by this act exclusively on county courts or 
judges of county courts, and may by the order provide 
how and to whom the compensation money is to be 
paid in cases where, but for the order, the money 
would be required to be paid into court, and the order 
may exclude from the operation of provisos (d) and (e) 
of paragraph (9) of this schedule agreements submitted 
to and approved by the committee, and may contain 
such incidental, consequential, or supplemental pro- 
visions as may appear to the secretary of state to be 
necessary or proper for the purposes of the order. 

(17) In the application of this schedule to Scot- 
land — 

(a) "County court judgment" as used in paragraph 
(9) of this schedule means a recorded decree arbitral : 

(b) Any application to the sheriff as arbitrator shall 
be heard, tried, and determined summarily in the 
manner provided by section fifty-two of the Sheriff 
Courts (Scotland) Act, 1876, save only that parties may 
be represented by any person authorized in writing to 
appear for them and subject to the declaration that it 
shall be competent to either party within the time and 
in accordance with the conditions prescribed by act of 
sederunt to require the sheriff to state a case on any 
question of law determined by him, and his decision 
thereon in such case may be submitted to either division 
of the court of session, who may hear and determine the 
same and remit to the sheriff with instruction as to the 
judgment to be pronounced, and an appeal shall lie 
from either of such divisions to the House of Lords. 

(c) Paragraphs (3), (4), and (8) shall not apply. 



APPENDIX 



225 



(18) In the application of this schedule to Ireland 
the expression "judge of the county court" shall include 
the recorder of any city or town, and an appeal shall lie 
from the court of appeal to the House of Lords. 



THIRD SCHEDULE 



Description of disease 



Anthrax 

Lead poisoning or its sequels . . 

Mercury poisoning or its sequelae 

Phosphorus poisoning or its sequelae 

Arsenic poisoning or its sequelae . . 



Description of process 



Ankylostomiasis 



Handling of wool, hair, bristles, 

hides, and skins. 
Any process involving the use of 

lead or its preparations or com- 
pounds. 
Any process involving the use of 

mercury or its preparations or 

compounds. 
Any process involving the use of 

phosphorus or its preparations 

or compounds. 
Any process involving the use of 

arsenic or its preparations or 

compounds. 
Mining. 



Where regulations or special rules made under any 
act of Parliament for the protection of persons em- 
ployed in any industry against the risk of contracting 
lead poisoning require some or all of the persons 
employed in certain processes specified in the regula- 
tions or special rules to be periodically examined by 
a certifying or other surgeon, then, in the application 
of this schedule to that industry, the expression "pro- 
cess" shall, unless the secretary of state otherwise 
directs, include only the processes so specified. 



APPENDIX E 

TABLE A 

The Workmen's Insurance oftlie German Empire 

Total population 58,000,000 
Wage-workers i 14,500,000 

Summary 2 — 1902 



Insurance against 


Sickness 


Accident 


Invalidity 




10,320,0003 
3,983,900 
200,350,600 


19,083,000* 


13,381,0005 

1,061,000 

210,677,100» 




834,600 


Receipts 7 (marks) 8 


141,394,100 


Including < employers 
contributions of { employed 


58,624,900 


125,663,300 


69,492,900 


130,784,000 


— 


69,492,900 


Expenses 10 


194,060,000 


124,796,900 


132,361,800» 


Including ( compensation 6 
costs of I admin istration u 


183,174,100 


108,133,100 


120,414,100» 


10,885,900 


16,663,800 


11,947,700 


Accumulated funds " 


186,645,200 


199,194,300 


1,007,477,500 


Compensation per Case ,3 


46.0 


128.7 


113.09 


Charges per person insured u . . 


18.8 


7.1 


13.29 



The National 15 Insurance — based on mutuality and self-admin istration 
— is compulsory for all wage-earners ! in Germany, irrespective of nation- 
ality, and, unlike mere Poor-Law Relief, confers oh every insured a legal 
claim — proceedings free of expense— to certain assistance in case of 
sickness, accident, or invalidity (infirmity and old age). 

i Wage-workers = professional workmen and laborers on wages; wage-earners = 
all persons working for wages or salary (up to 2000 marks per annum), as well work- 
men and laborers as industrial and agricultural officials, commercial assistants and 
Bmall employers (masters and farmers). 2 The numbers are taken from the finan- 
cial statement 1902 i01). 3 Persons employed for wages or salary (see note 1) in trade 
and commerce, partly in agriculture (forestry) and domestic service; see Table B. 
* Persons employed (see note Din industry and agriculture (forestry)— not in com- 
merce, handicrafts, and petty trades— including about 4.S00.OO0 small farmers (with 
areas under 10 hectares) and l,.500,(iu0 persons insured in additional or double employ- 
ments; see Table C- 5 Workers of all trades and servants likewise (industrial and 
agricultural) officials and commercial assistants with regular year's earnings up to 
2000 marks ; see Table 1). « Persons having received legal assistance in money or in 
kind (free medical or hospital treatment, medicines, etc.), provided by the workmen's 
insurance laws for disability caused hy sickness, accident, invalidity, or old age; see 
tables B. CD. ///. ; Excluding balance in hand at the commencement of the year and 
interest on investments. 8 1 mark = 100 pfennigs has the money value of about l shill- 
ing or % dollar, but the same purchasing power in Germany as about 2 shillings in 
Great Britain or Vj dollar in America. 9 Including state subsidies; see Table I), /. 
i« Excluding the year's addition to the funds. " Including the current costs of the 
whole organization. * 2 Provided by law in order to secure the payments named (note 
6). is Average amount paid out for each case of sickness, accident, invalidity, or old 
age; see Tables B, C, I), //. 14 Average amount paid in per head of insured; see 
Tables B, C , D, //. is Established by imperial laws embracing the whole empire. 



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daily wages) or : 
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Extension of these min 

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as No. 1, | term of reli< 

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as No. 1, J sick-] 

but j childl 

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per sick person 



! 



TABLE I. SICK INSURANCE 

The Workmen's Insurance in Germany and a oroad 




Compulsory insurance for: 
CLa-w of 5/10/99, not yet in force.) 

Voluntary insurant for 



l™™?^™^^ 





'oad 






employers, 


(a) Free i 




sks. 


66%% 
with : 
earnirj 
(b) Burial 
to 60$ 

All accidt 
man's 

j 




5 marks). 


71.7 millic 




0% 


(a) Only a i 




Wo 


(b) burial) j 




sks. 






5.5 marks). 


5.4 millio 


. — 










1 








No con 






(a) For ir 
or: 
free h 

(b) For ii 

(c) For si 


: 




No cc 


— 


loyers: 75% 


(a) For j 
free j 




loyed: 25% 




yhole). 


(b) For i 

(c) for si 


: 




(up to 32 
No c 


- 







TABLE II. ACCIDENT INSURANCE 
wkmen'a Insurance in Germany and Abroad 



•C"3"JW 



(—5- » 



7| 






I'opulaMon 2.'. million. - Wage-workers 



(l.nw.,f iT/:>/!is.) 



I engiigeil in trfifle, 






!..]■■ i,-.ii..i i-. .v» / 






million. — Wagc-worken 



l>.i]inl:iti>>ii - million.— Wage-workej 






Employers, employe-.!, state, ami province. 






> ov; of tba wugc9) from tl 



hospital with ...-liel'lo l.uoilvu W/;,. 



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mv. ivuii.Iit;, 



„,„.j" ' 



p t..t.n , 01 v.rh e 



rks, at most I 

i 1 
• head). ! 

at most 4.00 i 



sion). 

men's Insuran 

idy. 

rs, 

dT 



n's Insurance 



he Workmen's 



nsurance Abr< 



men's Insuran 



ich one-half). 



>ion). 



as N 



TABLE III. INVALID INSURANCE 
The U'orkmen's Insurance in (Ur many and Abroad 



('- MO 



'■I 






mutuality ami -t'll-aihiiiiii*tratiui 



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( La » ot 16/3/65 ) 



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r \orpbaus **/ 



■ W.-.rkin.-n'- lu-iw: «■ ALi-h!,' 



, H.:i« ..nt/J HI). 



INDEX 



Abinger, Lord, 84, 86, 96, 104. 
Accident insurance, 61, 78 et seq. 
Accidents, cost of , 81, 105. 
Accidents, mining, 80. 
Accidents, prevention of, 73, 109. 
Accidents, railroad, 79, 80. 
Adams, T. S., 10, 11. 
Alabama, 103. 
Alderson, Baron, 97. 
American Family Bank, 131. 
Ashley, W. J., 58. 
Asquith, H. H., 30, 95, 97, 152, 

160, 162. 
Assessment insurance, 125. 
Austria, 98. 

Balfour, A. J., 160. 

Baltimore & Ohio Railroad relief 

department, 120. 
Bartonshill Coal Co. v. Reid, 86. 
Beach, C. F., 92. 
Belgium, 98, 99. 
Birrell, A., 96. 
Bismarck, 57, 61, 119, 178. 
Black, Chief Justice, 92. 
Blackley, W. L., 12, 116, 153, 

155, 161. 
Booth, C, 13, 156, 157, 162, 165. 
Brandeis, L. D., 123. 
Brett, Lord Justice, 96. 
British Columbia, 98. 
Brooks, J. G., 8, 12, 32, 61, 64, 

76. 
Brown, B. F., 129. 
Burke, E., 153. 

Cairnes, J. E., 15. 
Caisse des retraites, 154. 
Call, H. L., 11. 
Cape of Good Hope, 98. 
Carlyle, T., 3. 



Carnarvon, Earl of, 20. 
Chamberlain, A., 163. 
Chamberlain, J., 95, 97, 116, 155, 

172. 
Clark, J. B., 22. 
Common employment, 65, 89, 92, 

95, 98, 102, 104. 
Compulsion, 54, 56, 122, 156, 

162, 168. 
Constans, 154. 
Contributory negligence, 92, 98, 

107. 
Cost of insurance, 124, 128, 129, 

132, 143, 145. 

Dangerous employments, 7, 81, 

87, 90, 98, 174. 
Dawson, M. M., 52. 
Democracy, 23, 57. 
Denmark, 98, 158. 
Devine, E. T., 10, 22. 
Digby, Sir K. E., 101. 
Dillon, J. F., 86, 104. 
Dryden, J. F., 123. 

Elizabeth, Poor-Law of, 18, 168. 
Elliott, A., 100. 
Ely, R. T., 15, 20. 
Employers' liability, 29, 83, 85, 

109. 
Existing institutions, 111 et seq. 

Factory acts, 28, 33. 

Farwell v. B. & W. R. R., 83, 85, 

86, 88. 
Fauquier, F. F., 136. 
Federalist, 89. 
Fellow servant. See Common 

employment. 
Fichte, 61. 
Finland, 98. 



232 



INDEX 



France, 98. 

Fraternal organizations, 119. 

Frederick the Great, 34. 

Frederick III, 61. 

Friendly Societies, 114 et seq., 162. 

Georgia, 100, 101. 

Germany, workmen's insurance 
in, 58, 60 et seq., 106, 119, 134, 
135, 140, 143, 153, 168, 175. 

Great Britain, 94, 97 et seq., 106, 
152, 160, 165. 

Greece, 98. 

Hale, E. E., 156. 
Hamilton, A., 88. 
Harrison, A., 28, 29. 
Hartmann, K., 49, 66, 68, 81. 
Hegel, 61. 

Henderson, C. B., 64. 
Hendricks, B. J., 126. 
Holland, 153. 
Holmes, J. K., 15. 
Hungary, 93. 
Hunter, R., 10, 11, 15. 
Huss, 61. 
Hutchins, B. L., 28, 29. 

Incidence, 45, 135 et seq., 147. 

Incomes, distribution of, 15, 144. 

Individualism, 25, 32, 34. 

Industrial insurance, 122. 

Insurance, excessive cost of, 50, 
128. 

Interstate Commerce Commis- 
sion, 80. 

Invalidity insurance, 62 et seq. 

Italy, 98. 

Jeune, Sir F. H., 86. 
Jevons, W. S., 40. 

Kestner, F., 76. 
Klein, G. A., 73, 94, 107. 
Knight, C, 28. 
Krupp, P. P. J., 120. 
Krupp's, 71, 120. 

Labor contract, the, 7, 81, 89, 
145. 



Labor, immobility of, 9, 88, 169. 

Labor's share, 22, 146. 

Lass, L., 38, 61, 63, 65, 71, 76, 

114, 119. 
Lassalle, 9. 

Lecky, W. E. H., 25, 29. 
Leo XIII, 3. 
Leroy-Beaulieu, P., 155. 
Living wage, a, 2, 4, 7, 9, 10, 14, 

21, 142, 146, 149, 171, 173. 
Lloyd, H. D., 149, 159. 
Lloyd-George, D., 163. 
Loch, C. S., 5. 
Lowe. See Sherbrooke. 
Luther, 61. 

McCarthy, J., 29. 

Malthus, 3, 19. 

Manning, Cardinal, S. 

Massachusetts, 91, 94, 102, 103, 
106, 109, 176, 178. 

Massachusetts Bureau of Labor, 
11, 14, 16, 87. 

Massachusetts Insurance Com- 
missioner, 124, 128, 129, 176, 
178. 

Massachusetts Railroad Commis- 
sion, 80. 

Mavor, J., 95. 

Montesquieu, 3. 

More, L. B., 14. 

Mulhall, 20. 

Netherlands, 98. 

New South Wales, 159. 

New York Bureau of Labor, 101, 

102, 106. 
New Zealand, 149, 154, 158 et 

seq. 
Norway, 98. 

Old-age insurance, 62 et seq. 
Old-age pensions, 112, 148 et seq. 
Old-line insurance, 125. 

Paine, T., 153. 
Parsons, F., 154, 159. 
Paternalism, 26, 32, 33, 43, 44, 

48. 
Pauperism, 13, 17, 18, 20, 36, 38, 

40, 44, 46, 149, 166. 



INDEX 



233 



Penn. R. R. Co. v. Aspell, 92. 
Penn. Railroad relief depart- 
ment, 120. 
Pensions to public servants, 150. 
Petrel, The, 86. 
Pollock, Sir F., 85, 86, 87. 
Poor-Laws, 18, 19. 
Postal savings banks, 154. 
Poverty, 10, 12, 14, 17, 38, 44, 46. 
Priestly v. Fowler, 83, 85, 104. 
Projet Constansy 154, 156. 
Prussia, 83, 91. 

"Q P," 123. 
Queensland, 98. 

Rae, J., 50. 

Registrar of friendly societies, 116. 
Relief departments, 120. 
Riebenach, M., 122. 
Risks, tariffs of, 49, 68, 81, 174. 
Risque professionnel, le, 92, 93, 

174. 
Rogers, J. E. T., 19. 
Rountree, B. S., 14. 
Rubinow, I. M., 64, 76, 123. 
Ruegg, A. H., 97, 98, 100. 
Russia, 98. 
Ryan, J. A., 10. 

Salisbury, Lord, 110. 
Sanborn, F. B., 20. 
Savings-bank insurance, 130. 
Savings banks, 16, 111. 
Sellers, E., 159. 
Shadwell, A., 10, 58, 76, 79 101, 

106. 
Shaw, Chief Justice, 84, 104. 
Sherbrooke, Lord, 95. 
Sickness insurance, 62 et seq. 
Socialism, 36. 
Social legislation, 25, 37. 
South Australia, 98. 



Spahr, C. B., 15, 144. 

Spain, 98. 

State insurance, 40, 42 et seq., 

122. 
Statute of Labourers, 33, 173. 
Sumner, H. L., 10, 11. 
Sweden, 98. 
Switzerland, 98. 

Taylor, W. I., 87. 

Thrift, 46, 52, 124, 132, 149, 161, 

168. 
Trade unions, 118. 
Traill, H. D., 29. 

U. S. Bureau of Labor, 98, 101. 

Vanderlip, F. A., 59, 76, 106. 

Victoria, 159. 

Volenti non fit injuria, 93, 97. 

Wage-earning period, 4, 141, 147, 

166, 173. 
Wage statistics, 11. 
Walford, 53, 75. 
Walker, F. A., 4, 5, 9, 15. 
Warner, A. G., 13, 29. 
Wealth, distribution of, 15. 
Webb, S. & B., 82, 87, 118. 
Weber, A. F., 80, 97. 
West Australia, 98. 
Wilkinson, J. F., 152. 
William I, 61, 118. 
William H, 61. 
Willoughby, W. F., 11, 64, 101, 

113. 
Workmen's compensation acts, 

99, 103. 
Wright, C. D., 102. 
Wright, E., 126, 128, 131. 

Zacher, G., 64, 98. 
Zahn, F. W., 106. 






CAMBRIDGE . MASSACHUSETTS 
U . S . A 



FEB 



85 



1903 






